What Macroeconomic Conditions Lead Financial Crises?

Michael Kiley

No 2018-038, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Research has suggested that a rapid pace of nonfinancial borrowing reliably precedes financial crises, placing the pace of debt growth at the center of frameworks for the deployment of macroprudential policies. I reconsider the role of asset-prices and current account deficits as leading indicators of financial crises. Run-ups in equity and house prices and a widening of the current account deficit have substantially larger (and more statistically-significant) effects than debt growth on the probability of a financial crisis in standard crisis-prediction models. The analysis highlights the value of graphs of predicted crisis probabilities in an assessment of predictors.

Keywords: Current account; Debt; Equity prices; Financial crisis; House prices (search for similar items in EconPapers)
JEL-codes: E44 F32 G01 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2018-06-15
New Economics Papers: this item is included in nep-cba, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: What macroeconomic conditions lead financial crises? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2018-38

DOI: 10.17016/FEDS.2018.038

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