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Financial Hazard Map: Financial Vulnerability Predicted by a Random Forests Classification Model

Katsuyuki Tanaka (), Takuji Kinkyo () and Shigeyuki Hamori ()
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Katsuyuki Tanaka: Graduate School of Economics, Kobe University, 2-1, Rokkodai, Nada-Ku, Kobe 657-8501, Japan
Takuji Kinkyo: Graduate School of Economics, Kobe University, 2-1, Rokkodai, Nada-Ku, Kobe 657-8501, Japan

Sustainability, 2018, vol. 10, issue 5, 1-18

Abstract: This study develops a systematic framework for assessing a country’s financial vulnerability using a predictive classification model of random forests. We introduce a new indicator that quantifies the potential loss in bank assets and measures a country’s overall vulnerability by aggregating these indicators across the banking sector. We also visualize the degree of vulnerability by creating a Financial Hazard Map that highlights countries and regions with underlying risks in their banking sectors.

Keywords: financial hazard map; random forests; early warning system; bank failure (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Financial Hazard Map: Financial Vulnerability Predicted by a Random Forests Classification Model (2017)
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