Credit Funding and Banking Fragility: An Empirical Analysis for Emerging Economies
Alexander Guarín-López () and
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Alexander Guarín-López: Banco de la República de Colombia, http://www.banrep.gov.co/es/alexander-guarin
Authors registered in the RePEc Author Service: Alexander Guarín López ()
Borradores de Economia from Banco de la Republica de Colombia
This paper proposes an empirical model to identify and forecast banking fragility episodes using information on the credit funding sources. We predict the probability of occurrence of such episodes 0, 3 and 6 months ahead employing a Bayesian Model Averaging of logistic regressions. The exercises use monthly balance sheet data since the middle of the nineties for the banking system of nine merging economies: Brazil, Colombia, Croatia, Czech Republic, Mexico, Peru, Poland, Taiwan and Turkey. Our findings suggest that the increasing use of wholesale funds to support credit expansion provides warning signals of banking frailness. The in-sample and out-of-sample predictions indicate that the proposed technique is a suitable tool for forecasting short-term financial fragility events. Therefore, monitoring these funds through our tool could become useful in prudential practice.
Keywords: credit cycle; financial stability; wholesale funds; balance sheet; logistic model regression; Bayesian model averaging. (search for similar items in EconPapers)
JEL-codes: C11 C52 C53 G01 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-for
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Working Paper: Credit Funding and Banking Fragility: An Empirical Analysis for Emerging Economies (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:931
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