Leading indicators of systemic banking crises: Finland in a panel of EU countries
Peter Sarlin (),
Patrizio Laina and
Juho Nyholm ()
No 1758, Working Paper Series from European Central Bank
Abstract:
This paper investigates leading indicators of systemic banking crises in a panel of 11 EU countries, with a particular focus on Finland. We use quarterly data from 1980Q1 to 2013Q2, in order to create a large number of macro-financial indicators, as well as their various transformations. We make use of univariate signal extraction and multivariate logit analysis to assess what factors lead the occurrence of a crisis and with what horizon the indicators lead a crisis. We find that loans-to-deposits and house price growth are the best leading indicators. Growth rates and trend deviations of loan stock variables also yield useful signals of impending crises. While the optimal lead horizon is three years, indicators generally perform well with lead times ranging from one to four years. We also tap into unique long time-series of the Finnish economy to perform historical explorations into macro-financial vulnerabilities. JEL Classification: E44, F30, G01, G15, C43
Keywords: banking crisis; Leading indicators; logit analysis; macro-financial indicators; signal extraction (search for similar items in EconPapers)
Date: 2015-02
New Economics Papers: this item is included in nep-ban and nep-cba
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Citations: View citations in EconPapers (37)
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Journal Article: Leading indicators of systemic banking crises: Finland in a panel of EU countries (2015) 
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20151758
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