Arbeitspapier

Macro-financial vulnerabilities and future financial stress: assessing systemic risks and predicting systemic events

This paper develops a framework for assessing systemic risks and for predicting (out-of-sample) systemic events, i.e. periods of extreme financial instability with potential real costs. We test the ability of a wide range of “stand alone” and composite indicators in predicting systemic events and evaluate them by taking into account policy makers’ preferences between false alarms and missing signals. Our results highlight the importance of considering jointly various indicators in a multivariate framework. We find that taking into account jointly domestic and global macrofinancial vulnerabilities greatly improves the performance of discrete choice models in forecasting systemic events. Our framework shows a good out-of-sample performance in predicting the last financial crisis. Finally, our model would have issued an early warning signal for the United States in 2006 Q2, 5 quarters before the emergence of money markets tensions in August 2007.

Language
Englisch

Bibliographic citation
Series: ECB Working Paper ; No. 1311

Classification
Wirtschaft
Financial Markets and the Macroeconomy
Central Banks and Their Policies
Global Outlook
International Finance Forecasting and Simulation: Models and Applications
Financial Crises
Subject
Asset Price Booms and Busts
Early Warning Indicators
Financial stress
Macro-Prudential Policies
Wirtschaftsindikator
Makroökonomik
Finanzkrise
Prognoseverfahren
Schwellenländer
Industrieländer

Event
Geistige Schöpfung
(who)
Lo Duca, Marco
Peltonen, Tuomas A.
Event
Veröffentlichung
(who)
European Central Bank (ECB)
(where)
Frankfurt a. M.
(when)
2011

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Lo Duca, Marco
  • Peltonen, Tuomas A.
  • European Central Bank (ECB)

Time of origin

  • 2011

Other Objects (12)