Financial Soundness Indicators and Banking Crises

Author/Editor: Matias Costa Navajas ; Aaron Thegeya
Publication Date: December 23, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: The paper tests the effectiveness of financial soundness indicators (FSIs) as harbingers of banking crises, using multivariate logit models to see whether FSIs, broad macroeconomic indicators, and institutional indicators can indeed predict crisis occurrences. The analysis draws upon a data set of homogeneous indicators comparable across countries over the period 2005 to 2012, leveraging the IMF’s FSI database. Results indicate significant correlation between some FSIs and the occurrence of systemic banking crises, and suggest that some indicators are precursors to the occurrence of banking crises.
Series: Working Paper No. 13/263
Subject(s): Financial soundness indicators | Banking sector | Banking crisis | External shocks

Publication Date: December 23, 2013
ISBN/ISSN: 9781484327616/1018-5941 Format: Paper
Stock No: WPIEA2013263 Pages: 38
US$18.00 (Academic Rate:
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