What predicts Financial (In)Stability? A Bayesian Approach
Michael Sigmund and
Ingrid Stein ()
Credit and Capital Markets, 2017, vol. 50, issue 3, 299-336
This paper contributes to the literature on early warning indicators by applying a Bayesian model averaging approach. Our analysis, based on Austrian data, is carried out in two steps: First, we construct a quarterly financial stress index (AFSI) quantifying the level of stress in the Austrian financial system. Second, we examine the predictive power of various indicators, as measured by their ability to forecast the AFSI. Our approach allows us to investigate a large number of indicators. The results show that banks’ share price growth and cross-border lending are among the best early warning indicators.
JEL-codes: G01 G28 (search for similar items in EconPapers)
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Working Paper: What predicts financial (in)stability? A Bayesian approach (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:kuk:journl:v:50:y:2017:i:3:p:299-336
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