[PDF] A Leading Indicator Model Of Banking Distress Developing An Early Warning System For Hong Hong And Other Emeap Economies eBook

Author : Jim Wong
Publisher :
Page : 46 pages
File Size : 30,3 MB
Release : 2007
Category :
ISBN :

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This study develops a probit econometric model to identify a set of leading indicators of banking distress and estimate banking distress probability for Hong Kong and other EMEAP economies. Macroeconomic fundamentals, currency crisis vulnerability, credit risk of banks and companies, asset price bubbles, credit growth, and the occurrence of distress of other economies in the region are found to be important leading indicators of banking distress in the home economy. The predictive power of the model is reasonably good. A case study of Hong Kong based on the latest estimate of banking distress probability and stress testing results shows that currently the banking sector in Hong Kong is healthy and should be able to withstand well certain possible adverse shocks. Under some extreme shocks originating from real GDP growth and property prices such as those that occurred during the Asian financial crisis, the model indicates a non-negligible risk of an occurrence of banking distress in Hong Kong. However, the chances of the occurrence of such severe events are extremely low. Simulation results also suggest that compared to the period before the Asian financial crisis, the local banking sector is currently more capable of withstan ding shocks similar to those that occurred during that crisis. The study also finds that banking distress is contagious, suggesting that to be effective in monitoring banking distress, close cooperation between central banks should be in place.

Author : Asian Development Bank
Publisher : Springer
Page : 164 pages
File Size : 19,70 MB
Release : 2005-02-15
Category : Business & Economics
ISBN : 0230501060

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Since the 1997 Asian financial crisis, East Asia has implemented a number of initiatives designed to strengthen monetary and financial cooperation, bolstering the region's resilience to economic and financial vulnerabilities. One such initiative is the ASEAN+3 Information Exchange and Policy Dialogue, which includes development of early warning systems (EWS) for financial crises. This book examines efforts to develop EWS models. Specifically, the book analyzes the current understanding of the causes of currency and banking crises, describes recent progress in developing and applying EWS models for currency and banking crises, reviews methodolgical issues, assesses the predictive power of EWS models and also highlights areas where further research is required to make these models more effective tools for policy analysis. The case studies apply both parametric and nonparametric approaches to EWS modleing using data from six East Asian countries.

Author : Jens Michael Rabe
Publisher : diplom.de
Page : 84 pages
File Size : 30,18 MB
Release : 2000-03-30
Category : Business & Economics
ISBN : 3832422552

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Inhaltsangabe:Abstract: The banking and currency crises of the last two decades inflicted substantial financial, economic, and social damage on the countries in which they originated. In this work, the efficiency of early warning indicators for these disastrous economic events is evaluated. An analysis of the traditional and recent literature on currency crises is performed in order to extract potential early warning indicators that are suggested by theory. Alongside others, these candidate indicators are tested in alternative empirical studies that are reviewed in this work. The results are mixed, but somewhat encouraging for further research in this field. Furthermore, the analysis is extended to a critique of systems of early warning indicators currently used by international institutions. Inhaltsverzeichnis:Table of Contents: 1.Introduction1 2.The Currency Crisis Literature as a Reference Point for the Identification of Early Warning Indicators4 2.1The Traditional Theory5 2.2Second Generation Models11 2.3A Cross-generation Framework Proposition19 2.4Early Warning Indicators as Suggested by Theory22 3.The Empirical Assessment of Early Warning Indicators24 3.1Univariate Indicators for Financial Crises24 3.1.1Cross-Country Regressions26 3.1.2Multivariate Probit Models35 3.1.3The Signals Approach40 3.2Composite Leading Indicators for Financial Crises48 4.A Critique of Early Warning Indicators Used in Practice53 5.Conclusion64 Appendix68 Bibliography69

Author : Nashwa Saleh
Publisher : Anthem Press
Page : 208 pages
File Size : 18,15 MB
Release : 2010-08-01
Category : Business & Economics
ISBN : 0857286684

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How did the US financial crisis snowball into USD 15 trillion global losses? This book offers a clear synthesis and original analysis of the various factors that led to the financial crisis of 2007-2010 - namely, an asset price bubble and excessive leverage. The focus is on the ingredients of and dynamics within the international financial system, and as such is the most comprehensive publication in scope to date in terms of market, country and instrument coverage. In addition to its thorough dissection of the causes and consequences of the most calamitous financial crisis in the past seventy years, the author also debates 'the way forward', including regulatory challenges, proposed changes and critique, and early warning systems.

Author : Iva Petrova
Publisher : International Monetary Fund
Page : 43 pages
File Size : 11,89 MB
Release : 2011-05-01
Category : Business & Economics
ISBN : 1455254312

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This paper develops a new index which provides early warning signals of fiscal sustainability problems for advanced and emerging economies. Unlike previous studies, the index assesses the determinants of fiscal stress periods, covering public debt default as well as near-default events. The fiscal stress index depends on a parsimonious set of fiscal indicators, aggregated using the approach proposed by Kaminsky, Lizondo and Reinhart (1998). The index is used to assess the build up of fiscal stress over time since the mid-1990s in advanced and emering economies. Fiscal stress has increased recently to record-high levels in advanced countries, reflecting raising solvency risks and financing needs. In emerging economies, risks are lower than in mature economies owing to sounder fiscal fundamentals, but fiscal stress remains higher than before the crisis.

Author : Juzhong Zhuang
Publisher :
Page : 112 pages
File Size : 26,26 MB
Release : 2004-10-01
Category : Business & Economics
ISBN : 9789715615143

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In the wake of currency and banking crises in Latin America, Europe, and Asia, these articles provide a regional early warning system prototype designed to anticipate emerging macroeconomic, financial, and corporate sector vulnerabilities. Current theories and practices in the banking world are reviewed and analyzed with an eye toward which economic variables and indicators must be monitored to prevent further crises. The current banking and currency situations in Indonesia, Malaysia, the Philippines, and Thailand are examined and current thinking on how these countries can prevent currency and banking crises is detailed.

Author : John W. Kensinger
Publisher : Emerald Group Publishing
Page : 223 pages
File Size : 43,16 MB
Release : 2017-12-13
Category : Business & Economics
ISBN : 178743270X

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The broad theme of this volume of Research in Finance is "Comparing the Influence upon Equity Valuation of Strategy Compared with Cash Flow Expectations." Contributions assess the strong role of strategy in equity valuation, compared with valuation of expected dividends.

Author : Magdalena Tomczynska
Publisher :
Page : 0 pages
File Size : 19,14 MB
Release : 2009
Category :
ISBN :

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Financial crises have become relatively frequent events since the beginning of the 1980s. They have taken three main forms: currency crises, banking crises, or both - so called twin crises. As the number of developed economies, developing countries, and economies in transition experienced severe financial crashes researchers are trying to propose a framework for systemic analyses. That is why attempts to advance the understanding of features leading to the outbreak of financial crisis as well as the reasons of vulnerability have become more and more important. In recent years a number of efforts have been undertaken to identify variables that act as early warning signals for crises. The purpose of this paper is to provide some perspective on the issue of early warning signals of vulnerability to currency crises. In particular, it is aimed at presenting and highlighting the main findings of theoretical literature in this area. An effective warning system should consider a broad variety of indicators, as currency crises seem to be usually associated with multiple economic and sometimes political problems. Indicators that have proven to be particularly useful in anticipating crises and received empirical support include the development of international reserves, real exchange rate, domestic credit, credit to the public sector, domestic inflation, and structure and financing of public debt. Other indicators that have found support are trade balance, export performance, money growth, M2/international reserves ratio, foreign interest rates, real GDP growth, and fiscal deficit. Many of the proposed leading indicators have been able to predict particular crises, however, only few have showed ability to do so consistently. Generally, economic models can be said to be more successful in predicting crises that erupt because of weak fundamentals, which make country vulnerable to adverse shocks. They are less likely in anticipating crises due to selffulfilling expectations or pure contagion effects. So far economists are only able to identify situations in which an economy could face the risk of a financial crisis. This is most because of the well-known fact that if we knew the crisis would have already occurred. Warning indicators seem to be unlikely to predict crises in precise way but their analyses can provide extended information about impending problems what enables to take preventive measures.

Author : Mr. Abdul Abiad
Publisher : International Monetary Fund
Page : 61 pages
File Size : 31,43 MB
Release : 2003-02-01
Category : Business & Economics
ISBN : 1451892632

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Previous early-warning systems (EWSs) for currency crises have relied on models that require a priori dating of crises. This paper proposes an alternative EWS, based on a Markov-switching model, which identifies and characterizes crisis periods endogenously; this also allows the model to utilize information contained in exchange rate dynamics. The model is estimated using data for the period 1972-99 for the Asian crisis countries, taking a country-by-country approach. The model outperforms standard EWSs, both in signaling crises and reducing false alarms. Two lessons emerge. First, accounting for the dynamics of exchange rates is important. Second, different indicators matter for different countries, suggesting that the assumption of parameter constancy underlying panel estimates of EWSs may contribute to poor performance.

Author : Santiago Herrera
Publisher :
Page : 17 pages
File Size : 32,77 MB
Release : 2016
Category :
ISBN :

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Models for an early warning system do a good job predicting vulnerability to macroeconomic crises in several Latin American countries.Herrera and Garcia develop an early warning system for macroeconomic vulnerability for several Latin American countries, drawing on the work of Kaminsky, Lizondo, and Reinhart (1997) and Kaminsky (1988).They build a composite leading indicator that signals macroeconomic vulnerability, showing that, historically, crises tend to happen in certain vulnerable situations.Interested mainly in providing an operational tool, Herrera and Garcia use a different approach to the problem than Kaminsky did. First, they use fewer variables to generate the signals. Then, after the variables are aggregated, a signal is issued, depending on the behavior of the composite index. (Kaminsky's procedure was to generate signals with each variable and then aggregate them.)Their results are satisfactory both statistically and operationally.Statistically, Type I and Type II errors are smaller than those reported in previous papers.Operationally, this system of leading indicators is less costly to maintain, given fewer variables - which are widely available and reported with timeliness.Herrera and Garcia tested the models' out-of-sample predictive ability on crises that occurred after the first stage of their project was finished: Colombia (September 1998), Brazil (January 1999), and Ecuador (February 1999). In all cases the models correctly anticipated the speculative attacks.Moreover, Mexico's models, estimated with information available two years before the 1994 crisis, show that these signaling devices would have been useful for signaling the macroeconomic vulnerability before December 1994.This paper - a product of the Economic Policy Sector Unit, Latin America and the Caribbean Region - is part of a larger effort in the region to build tools that policymakers can use to prevent crises. The authors may be contacted at [email protected] or [email protected].