How Useful are Regime-Switching Models in Banking Crises Identification?
Tai-kuang Ho ()
No 764, Econometric Society 2004 Far Eastern Meetings from Econometric Society
We employ a regime-switching approach to the identification of banking crises. This approach reduces the arbitrariness in crisis identification by endogenizing the choices of crisis threshold and crisis duration. Using a sample of 47 countries, we show that this approach also subject to several same problems as the common procedures. The method is sample-dependent, tends to invent much more crises, and is less robust to different model specifications. We conclude that a bind application of regime switching model to crisis identification is questionable
Keywords: Markov-switching model; choice of crisis threshold; banking crises identification (search for similar items in EconPapers)
JEL-codes: C25 C49 G21 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:feam04:764
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