JOURNAL ARTICLE
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What Predicts Financial (In)Stability? A Bayesian Approach
Sigmund, Michael | Stein, Ingrid
Credit and Capital Markets – Kredit und Kapital, Vol. 50 (2017), Iss. 3 : pp. 299–336
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Dr. Michael Sigmund, Oesterreichische Nationalbank, Financial Stability and Macroprudential Supervision Division, Otto Wagner Platz 3, 1090 Vienna Austria
Dr. Ingrid Stein, Deutsche Bundesbank, Department of Financial Stability, Wilhelm-Epstein-Strasse 14, 60431 Frankfurt Germany
Abstract
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 banks' share price growth and cross-border lending are among the best early warning indicators.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Michael Sigmund / Ingrid Stein: What Predicts Financial (In)Stability? A Bayesian Approach | 1 |