EconPapers    
Economics at your fingertips  
 

Macro-financial vulnerabilities and future financial stress: Assessing systemic risks and predicting systemic events

Marco Lo Luca and Tuomas Peltonen ()

No 2/2011, BOFIT Discussion Papers from Bank of Finland, Institute for Economies in Transition

Abstract: This paper develops a framework for assessing systemic risks and for predicting (out-of-sample) systemic events, i.e. periods of extreme financial instability with potential real costs. We test the ability of a wide range of stand alone. and composite indicators in predicting systemic events and evaluate them by taking into account policy makers f preferences between false alarms and missing signals. Our results highlight the importance of considering jointly various indicators in a multiva-riate framework. We find that taking into account jointly domestic and global macro-financial vul-nerabilities greatly improves the performance of discrete choice models in forecasting systemic events. Our framework shows a good out-of-sample performance in predicting the last financial cri-sis. Finally, our model would have issued an early warning signal for the United States in 2006Q2, 5 quarters before the emergence of money markets tensions in August 2007. JEL Codes: E44, E58, F01, F37, G01 Avaisanat: Early warning indicators, asset price booms and busts, financial stress, macro-prudential policies

JEL-codes: E44 E58 F01 F37 G01 (search for similar items in EconPapers)
Date: 2011-04-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37) Track citations by RSS feed

Published in Published in Journal of Banking and Finance, Volume 37, Issue 7, July 2013, Pages 2183-2195 as Assessing systemic risks and predicting systemic events

Downloads: (external link)
https://helda.helsinki.fi/bof/bitstream/123456789/8116/1/168447.pdf (application/pdf)

Related works:
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:bof:bofitp:2011_002

Access Statistics for this paper

More papers in BOFIT Discussion Papers from Bank of Finland, Institute for Economies in Transition Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland. Contact information at EDIRC.
Bibliographic data for series maintained by Minna Nyman ().

 
Page updated 2019-10-14
Handle: RePEc:bof:bofitp:2011_002