Critical slowing down as an early warning signal for financial crises?

Cees Diks, Cars Hommes and Juanxi Wang ()
Additional contact information
Cees Diks: University of Amsterdam
Juanxi Wang: University of Amsterdam

Empirical Economics, 2019, vol. 57, issue 4, No 6, 1228 pages

Abstract: Abstract Financial crises have repeatedly been coined as a potential application area in the recent literature on constructing early warning signals through identifying characteristics of critical slowing down on the basis of time series observations. To test this idea, we consider four historical financial crises—Black Monday 1987, the 1997 Asian Crisis, the 2000 Dot-com bubble burst, and the 2008 Financial Crisis—and investigate whether there is evidence for critical slowing down prior to these market collapses. We find statistical evidence for critical slowing down before Black Monday 1987, while the results are mixed or insignificant for the more recent financial crises.

Keywords: Time series; Bifurcations; Nonlinear dynamical systems; Critical slowing down; Early warning signal; Financial instability (search for similar items in EconPapers)
JEL-codes: C14 C53 G01 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://link.springer.com/10.1007/s00181-018-1527-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Critical Slowing Down as Early Warning Signals for Financial Crises? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:empeco:v:57:y:2019:i:4:d:10.1007_s00181-018-1527-3

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-018-1527-3

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().