Banking crises and recessions: what can leading indicators tell us?

Matthew Corder and Martin Weale (martin.weale@outlook.com)

No 33, Discussion Papers from Monetary Policy Committee Unit, Bank of England

Abstract: It is widely suggested that there is some relationship between banking crises and recessions. We assess whether there is evidence for interdependency between recessions and banking crises using both non-parametric tests and unconditional bivariate probit models and find strong evidence for interdependence. We then consider whether leading indicators can help predict banking crises and recessions and if these variables can explain the previously obvserved interdependence. Inclusion of exogenous variables means that the observed interdependence between banking crises and recessions disappears - indicating that the observed interdependence is a result of easily observable common causes rather than unobserved links.

Keywords: Crises; recessions; interdependency; bivariate probit analysis (search for similar items in EconPapers)
JEL-codes: E37 G21 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2011-09-01
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mac
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:mpc:wpaper:0033

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