Procyclicality and the Search for Early Warning Indicators
December 20, 2013
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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:
Issue:
258
Series:
Working Paper No. 2013/258
Stock No:
WPIEA2013258
ISBN:
9781484320839
ISSN:
1018-5941
