Procyclicality and the Search for Early Warning Indicators

December 20, 2013

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

This paper compares three types of early warning indicators of financial instability – those based on financial market prices, those based on normalized measures of total credit and those based on liabilities of financial intermediaries. Prices perform well as concurrent indicators of market conditions but are not suitable as early warning indicators. Total credit and liabilities convey similar information and perform better as early warning indicators, but liabilities are more transparent and the decomposition between core and non-core liabilities convey additional useful information.

Subject: Banking, Basel III, Credit, Early warning systems, Financial crises, Financial regulation and supervision, Monetary aggregates, Money

Keywords: bank, bank liability, banking sector liability, Basel III, core liability, Credit, credit cycles, Early warning systems, emerging economy, emerging economy crisis, financial crisis, financial stability, foreign currency, Global, liability, liability component, monetary aggregate, Monetary aggregates, Non-core liabilities, WP

Pages:
16
Volume:
2013
DOI:
https://doi.org/10.5089/9781484320839.001
Issue:
258
Series:
Working Paper No. 2013/258
Stock No:
WPIEA2013258
ISBN:
9781484320839
ISSN:
1018-5941

IMF’s Work

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

Loading component...

IMF Working Papers