What predicts financial (in)stability? A Bayesian approach

Arbeitspapier

This paper contributes to the literature on early warning indicators by applying a Bayesian model averaging approach. Our analysis, based on Austrian data, is carried out in two steps: First, we construct a quarterly financial stress index (AFSI) quantifying the level of stress in the Austrian financial system. Second, we examine the predictive power of various indicators, as measured by their ability to forecast the AFSI. Our approach allows us to investigate a large number of indicators. The results show that excessive credit growth and high returns of banks' stocks are the best early warning indicators. Unstable funding (as measured by the loan to deposit ratio) also has a high predictive power.

Object Details

• ISBN: 978-3-95729-091-5
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bundesbank Discussion Paper ; No. 36/2014

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Financial Institutions and Services: Government Policy and Regulation
• Subject: financial crisis ; early warning indicators ; government policy and regulation ; financial stress index

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eidenberger, Judith ; Neudorfer, Benjamin ; Sigmund, Michael ; Stein, Ingrid
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/106175
• Last update: 10.03.2025, 11:45 AM CET