Monitoring Banking Sector Fragility: A Multivariate Logit Approach

Enrica Detragiache () and Asli Demirguc-Kunt

No 1999/147, IMF Working Papers from International Monetary Fund

Abstract: This paper explores how a multivariate logit empirical model of banking crisis probabilities can be used to monitor banking sector fragility. The proposed approach relies on readily available data, and the fragility assessment has a clear interpretation based on in-sample statistics. The model has better in-sample performance than currently available alternatives, and the monitoring system can be tailored to fit the preferences of the decision maker regarding type I and type II errors. The framework can be useful as a preliminary screen to economize on precautionary costs.

Keywords: WP; crisis probability; banking crisis; banking crises probability; forecasted probability; type I error; Banking crises; bank fragility; monitoring; out-of-sample probability forecast; sample estimation result; Commercial banks; Real interest rates; Systemic crises; East Asia (search for similar items in EconPapers)
Pages: 27
Date: 1999-10-01
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Citations: View citations in EconPapers (56)

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Journal Article: Monitoring Banking Sector Fragility: A Multivariate Logit Approach (2000)
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