Arbeitspapier
How to predict financial stress? An assessment of Markov switching models
This paper predicts phases of the financial cycle by using a continuous financial stress measure in a Markov switching framework. The debt service ratio and property market variables signal a transition to a high financial stress regime, while economic sentiment indicators provide signals for a transition to a tranquil state. Whereas the in-sample analysis suggests that these indicators can provide an early warning signal up to several quarters prior to the respective regime change, the out-of-sample findings indicate that most of this performance is owing to the data gathered during the global financial crisis. Comparing the prediction performance with a standard binary early warning model reveals that the Markov switching model is outperforming the vast majority of model specifications for a horizon up to three quarters prior to the onset of financial stress.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Staff Working Paper ; No. 2017-32
- Klassifikation
-
Wirtschaft
Quantitative Policy Modeling
Financial Crises
International Financial Markets
- Thema
-
Business fluctuations and cycles
Central bank research
Econometric and statistical methods
Financial markets
Financial stability
Financial system regulation and policies
Monetary and financial indicators
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Duprey, Thibaut
Klaus, Benjamin
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2017
- DOI
-
doi:10.34989/swp-2017-32
- Handle
- Letzte Aktualisierung
-
20.09.2024, 08:23 MESZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Duprey, Thibaut
- Klaus, Benjamin
- Bank of Canada
Entstanden
- 2017
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