An Early Warning System for Macro-prudential Policy in France
Virginie Coudert () and
Working papers from Banque de France
We construct an early warning system for detecting banking crises that could be used for the macroprudential policy conduct in France. First, we select macro-financial risk indicators among a large number of candidates by considering their performances both over a panel of ten euro area countries and at the French level, for the 1985:Q1 to 2009:Q4. Second, we run all the logit models including four of these indicators, one being necessarily a measure of credit gap to fit the Basel Committee recommendations. We then retain two sets of models: one including those with all coefficients significant and expected signs, another one, obtained by relaxing these criteria. Third, we aggregate the probabilities estimated by the models, by giving each a weight proportional to its usefulness at predicting crises either at the panel or the country-level. The simulations performed both over and out of the sample show that aggregating more models yields better results than relying on one single model or only a few. Performance is also enhanced by aggregating models’ results with country-specific weights relatively to common panel-weightings.
Keywords: Macroprudential policy; Banking Crises; Early Warning Indicators (search for similar items in EconPapers)
JEL-codes: E52 G12 C58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-mac and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:609
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