Early warning models for systemic banking crises: Can political indica-tors improve prediction?

Arbeitspapier

This study provides the first attempt to evaluate whether a logit early warning system (EWS) for systemic banking crises can produce better predictions when political indicators are used alongside traditional macro-financial indicators. Based on a dataset covering 32 advanced economies for the period 1975-2017, we show that the inclusion of political indicators helps improve the predictive performance of the model. While the improvement is small, it is statistically significant and consistent for several different performance measures and robustness tests. Among the newly employed political variables, variables indicating the political ideology of the ruling party and the time in office of the incumbent chief executive show significant correlations with the likelihood of systemic banking crises. The results suggest that a systemic banking crisis is less likely when the government is left-wing and when the chief executive officer has been in office longer.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Jena Economic Research Papers ; No. 2022-007

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions ; Forecasting Models; Simulation Methods ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General ; International Finance Forecasting and Simulation: Models and Applications ; Financial Crises ; Financial Institutions and Services: Government Policy and Regulation
• Subject: early warning systems ; systemic banking crises ; vulnerability ; political indicators ; macro-financial indicators

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Tran Huynh ; Übelmesser, Silke
• Event: Veröffentlichung
• (who): Friedrich Schiller University Jena, Faculty of Economics and Business Administration
• (where): Jena
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/268235
• Last update: 10.03.2025, 11:44 AM CET