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Robust Signals for Banking Crises

Author

Listed:
  • Ons Jedidi

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Jean-Sébastien Pentecôte

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

We develop an Early Warning System framework for predicting banking crises in 48 countries from 1977 to 2010. We deal with the problem of model uncertainty and omitted variables bias using Bayesian Model Averaging. Consistent with previous findings, GDP and credit growths, financial liberalization and external total debt are decisive in predicting the occurrence of banking crises. By maximizing the relative usefulness, we find an optimal level of type I and II errors. The robustness analysis shows that our results remain broadly stable when using different income groups of countries.

Suggested Citation

  • Ons Jedidi & Jean-Sébastien Pentecôte, 2015. "Robust Signals for Banking Crises," Post-Print halshs-01184074, HAL.
    • Handle: RePEc:hal:journl:halshs-01184074
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    More about this item

    Keywords

    model uncertainty; bayesian Model; banking crises;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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