IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2004-153.html
   My bibliography  Save this paper

Quantitative Assessment of the Financial Sector: An Integrated Approach

Author

Listed:
  • Mr. Rupert D Worrell

Abstract

This paper suggests a strategy designed to make best use of the available quantitative techniques of financial sector assessment. It incorporates early warning systems, financial sector forecasts, stress tests for systemically important financial institutions, interbank contagion analysis, and corporate and household financial indicators. It will seldom be possible to employ every one of these techniques, but the wider the range of methodologies used, the greater may be the insight into the strengths and vulnerabilities of the financial sector. The quantitative assessment is always complemented by a qualitative assessment, including reviews of relevant standards and codes.

Suggested Citation

  • Mr. Rupert D Worrell, 2004. "Quantitative Assessment of the Financial Sector: An Integrated Approach," IMF Working Papers 2004/153, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2004/153
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=17572
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Benjamin Sahel & Jukka Vesala, 2001. "Financial stability analysis using aggregated data," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 160-185, Bank for International Settlements.
    2. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    3. Morris Goldstein & Graciela Kaminsky & Carmen Reinhart, 2017. "Methodology and Empirical Results," World Scientific Book Chapters, in: TRADE CURRENCIES AND FINANCE, chapter 11, pages 397-436, World Scientific Publishing Co. Pte. Ltd..
    4. Mr. Armando Méndez Morales & Miss Liliana B Schumacher, 2003. "Market Volatility As a Financial Soundness Indicator: An Application to Israel," IMF Working Papers 2003/047, International Monetary Fund.
    5. De Bandt, Olivier & Hartmann, Philipp, 2000. "Systemic risk: A survey," Working Paper Series 35, European Central Bank.
    6. Kimmo Virolainen, 2001. "Financial stability analysis at the Bank of Finland," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 186-196, Bank for International Settlements.
    7. Wilson, Berry & Saunders, Anthony & Caprio, Gerard, Jr, 2000. "Mexico's Financial Sector Crisis: Propagative Linkages to Devaluation," Economic Journal, Royal Economic Society, vol. 110(460), pages 292-308, January.
    8. Pesaran, M. Hashem & Pick, Andreas, 2007. "Econometric issues in the analysis of contagion," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1245-1277, April.
    9. Douglas W. Diamond & Raghuram G. Rajan, 2005. "Liquidity Shortages and Banking Crises," Journal of Finance, American Finance Association, vol. 60(2), pages 615-647, April.
    10. Joshua Aizenman & Brian Pinto, 2004. "Managing Volatility and Crises: A Practitioner's Guide Overview," NBER Working Papers 10602, National Bureau of Economic Research, Inc.
    11. Bris, Arturo & Koskinen, Yrjo, 2002. "Corporate leverage and currency crises," Journal of Financial Economics, Elsevier, vol. 63(2), pages 275-310, February.
    12. Claessens, Stijn & Djankov, Simeon & Xu, Lixin Colin, 2000. "Corporate Performance in the East Asian Financial Crisis," The World Bank Research Observer, World Bank, vol. 15(1), pages 23-46, February.
    13. Hali J. Edison, 2003. "Do indicators of financial crises work? An evaluation of an early warning system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(1), pages 11-53.
    14. Ms. Catherine A Pattillo & Mr. Andrew Berg & Mr. Gian M Milesi-Ferretti & Mr. Eduardo Borensztein, 2000. "Anticipating Balance of Payments Crises--The Role of Early Warning Systems," IMF Occasional Papers 2000/004, International Monetary Fund.
    15. Flood, Robert & Marion, Nancy, 1999. "Perspectives on the Recent Currency Crisis Literature," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(1), pages 1-26, January.
    16. Eijffinger, S.C.W. & Goderis, B., 2002. "Financial crises, monetary policy and financial fragility : A second-generation model of currency crises," Other publications TiSEM d2ccad44-44f6-40d8-9be0-1, Tilburg University, School of Economics and Management.
    17. Youngjae Lim, 2003. "Sources of Corporate Financing and Economic Crisis in Korea: A Micro-evidence," NBER Working Papers 9575, National Bureau of Economic Research, Inc.
    18. Mr. Desiree Cherebin & Mr. Rupert D Worrell & Ms. Tracy Polius, 2001. "Financial System Soundness in the Caribbean: An Initial Assessment," IMF Working Papers 2001/123, International Monetary Fund.
    19. Mr. Cem Karacadag & Mr. Paul J. Heytens, 2001. "An Attempt to Profile the Finances of China’s Enterprise Sector," IMF Working Papers 2001/182, International Monetary Fund.
    20. Bussiere, Matthieu & Fratzscher, Marcel, 2006. "Towards a new early warning system of financial crises," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 953-973, October.
    21. Olga Andreeva, 2004. "Aggregate bankruptcy probabilities and their role in explaining banks’ loan losses," Working Paper 2004/02, Norges Bank.
    22. Philip Lowe, 2002. "Credit risk measurement and procyclicality," BIS Working Papers 116, Bank for International Settlements.
    23. repec:onb:oenbwp:y:2002:i:3:b:3 is not listed on IDEAS
    24. Caprio Jr., Gerard, 1998. "Banking on crises : expensive lessons from recent financial crises," Policy Research Working Paper Series 1979, The World Bank.
    25. Harvir Kalirai & Martin Scheicher, 2002. "Macroeconomic Stress Testing: Preliminary Evidence for Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 58-74.
    26. Ms. Yingbin Xiao & Mr. Dale F Gray & Cheng Hoon Lim & Michael T. Gapen, 2004. "The Contingent Claims Approach to Corporate Vulnerability Analysis: Estimating Default Risk and Economy-Wide Risk Transfer," IMF Working Papers 2004/121, International Monetary Fund.
    27. Mr. Gene L. Leon & Mr. Rupert D Worrell, 2001. "Price Volatility and Financial Instability," IMF Working Papers 2001/060, International Monetary Fund.
    28. Bank for International Settlements, 2001. "Marrying the macro- and micro-prudential dimensions of financial stability," BIS Papers, Bank for International Settlements, number 01.
    29. Andrew G Haldane & Glenn Hoggarth & Victoria Saporta, 2001. "Assessing financial system stability, efficiency and structure at the Bank of England," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 138-159, Bank for International Settlements.
    30. Asli Demirgüç-Kunt & Enrica Detragiache, 1998. "The Determinants of Banking Crises in Developing and Developed Countries," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 81-109, March.
    31. Markus Arpa & Irene Giulini & Andreas Ittner & Franz Pauer, 2001. "The influence of macroeconomic developments on Austrian banks: implications for banking supervision," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 91-116, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. International Monetary Fund, 2005. "Quantitative Assessment of a Financial System—Barbados," IMF Working Papers 2005/076, International Monetary Fund.
    2. Kuo-Wei Hsiao & Zhengyi Jiang, 2015. "The Pre- and Post-Crisis Stress Testing in the Banking Sector — A Literature Review," Global Credit Review (GCR), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 77-97.
    3. Schou-Zibell, Lotte & Albert, Jose Ramon & Song, Lei Lei, 2010. "A Macroprudential Framework for Monitoring and Examining Financial Soundness," Working Papers on Regional Economic Integration 43, Asian Development Bank.
    4. Männasoo, Kadri & Mayes, David G., 2009. "Explaining bank distress in Eastern European transition economies," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 244-253, February.
    5. Sorge, Marco & Virolainen, Kimmo, 2006. "A comparative analysis of macro stress-testing methodologies with application to Finland," Journal of Financial Stability, Elsevier, vol. 2(2), pages 113-151, June.
    6. Andrea M Maechler & Srobona Mitra & Delisle Worrell, 2010. "Decomposing Financial Risks and Vulnerabilities in Emerging Europe," IMF Staff Papers, Palgrave Macmillan, vol. 57(1), pages 25-60, April.
    7. Radu Muntean, 2009. "Early Warning Models for Banking Supervision in Romania," Advances in Economic and Financial Research - DOFIN Working Paper Series 39, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB.
    8. Martin Èihák, 2005. "Stress Testing of Banking Systems (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 55(9-10), pages 418-440, September.
    9. repec:erf:erfstu:78 is not listed on IDEAS
    10. Mr. Rupert D Worrell & Andrea M. Maechler & Ms. Srobona Mitra, 2007. "Decomposing Financial Risks and Vulnerabilities in Eastern Europe," IMF Working Papers 2007/248, International Monetary Fund.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. K. Batu Tunay, 2010. "Banking Crises and Early Warning Systems: A Model Suggestion for Turkish Banking Sector," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 4(1), pages 9-46.
    2. Pavel Trunin & M. Kamenskih, 2007. "Monitoring Financial Stability In Developing Economies (Case of Russia)," Research Paper Series, Gaidar Institute for Economic Policy, issue 111.
    3. Andre Cartapanis, 2004. "Le declenchement des crises de change : qu'avons-nous appris depuis dix ans ?," Economie Internationale, CEPII research center, issue 97, pages 5-48.
    4. Lin, Chin-Shien & Khan, Haider A. & Chang, Ruei-Yuan & Wang, Ying-Chieh, 2008. "A new approach to modeling early warning systems for currency crises: Can a machine-learning fuzzy expert system predict the currency crises effectively?," Journal of International Money and Finance, Elsevier, vol. 27(7), pages 1098-1121, November.
    5. Beckmann, Daniela & Menkhoff, Lukas & Sawischlewski, Katja, 2006. "Robust lessons about practical early warning systems," Journal of Policy Modeling, Elsevier, vol. 28(2), pages 163-193, February.
    6. Mark Illing & Ying Liu, 2003. "An Index of Financial Stress for Canada," Staff Working Papers 03-14, Bank of Canada.
    7. Bussiere, Matthieu & Fratzscher, Marcel, 2006. "Towards a new early warning system of financial crises," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 953-973, October.
    8. Bussiere, Matthieu & Fratzscher, Marcel, 2006. "Towards a new early warning system of financial crises," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 953-973, October.
    9. Marcel Fratzscher, 2003. "On currency crises and contagion," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(2), pages 109-129.
    10. Cumperayot, Phornchanok & Kouwenberg, Roy, 2013. "Early warning systems for currency crises: A multivariate extreme value approach," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 151-171.
    11. Catão, Luis A.V. & Milesi-Ferretti, Gian Maria, 2014. "External liabilities and crises," Journal of International Economics, Elsevier, vol. 94(1), pages 18-32.
    12. Mariano Roberto S & Gultekin Bulent N & Ozmucur Suleyman & Shabbir Tayyeb & Alper C. Emre, 2004. "Prediction of Currency Crises: Case of Turkey," Review of Middle East Economics and Finance, De Gruyter, vol. 2(2), pages 1-21, August.
    13. Bernoth, Kerstin & Pick, Andreas, 2011. "Forecasting the fragility of the banking and insurance sectors," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 807-818, April.
    14. Diana Zigraiova & Petr Jakubik, 2014. "Systemic Event Prediction by Early Warning System," Working Papers IES 2014/01, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2014.
    15. Andrea Eross & Andrew Urquhart & Simon Wolfe, 2019. "Investigating risk contagion initiated by endogenous liquidity shocks: evidence from the US and eurozone interbank markets," The European Journal of Finance, Taylor & Francis Journals, vol. 25(1), pages 35-53, January.
    16. Mr. C. A. E. Goodhart & Miguel A. Segoviano & Boris Hofmann, 2006. "Default, Credit Growth, and Asset Prices," IMF Working Papers 2006/223, International Monetary Fund.
    17. repec:cuf:journl:y:2014:v:15:i:2:abiad is not listed on IDEAS
    18. Betz, Frank & Oprică, Silviu & Peltonen, Tuomas A. & Sarlin, Peter, 2014. "Predicting distress in European banks," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 225-241.
    19. Peltonen, Tuomas A., 2006. "Are emerging market currency crises predictable? A test," Working Paper Series 571, European Central Bank.
    20. Kamila Tomczak, 2023. "Transmission of the 2007–2008 financial crisis in advanced countries of the European Union," Bulletin of Economic Research, Wiley Blackwell, vol. 75(1), pages 40-64, January.
    21. Bertrand Candelon & Elena-Ivona Dumitrescu & Christophe Hurlin, 2012. "How to evaluate an Early Warning System ?," Working Papers halshs-00450050, HAL.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2004/153. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.