Predicting vulnerabilities in the EU banking sector: the role of global and domestic factors

Markus Behn, Carsten Detken, Tuomas Peltonen () and Willem Schudel

No 29, ESRB Working Paper Series from European Systemic Risk Board

Abstract: We estimate a multivariate early-warning model to assess the usefulness of private credit and other macro-financial variables in predicting banking sector vulnerabilities. Using data for 23 European countries, we find that global variables and in particular global credit growth are strong predictors of domestic vulnerabilities. Moreover, domestic credit variables also have high predictive power, but should be complemented by other macro-financial indicators like house price growth and banking sector capitalization that play a salient role in predicting vulnerabilities. Our findings can inform decisions on the activation of macroprudential policy measures and suggest that policy makers should take a broad approach in the analytical models that support risk identification and calibration of tools. JEL Classification: G01, G21, G28

Keywords: banking crises; early-warning model; signalling approach; systemic risk (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-ban, nep-eec and nep-rmg
Note: 2203070
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Predicting Vulnerabilities in the EU Banking Sector: The Role of Global and Domestic Factors (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:srk:srkwps:201629

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