{
  "title": "Systemic Risk Assessment in Low Income Countries: Balancing Financial Stability and Development",
  "publication": "IMF Working Papers, August 12, 2015",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/systemic-risk-assessment-in-low-income-countries-balancing-financial-stability-and-43196",
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  "summary": "We propose a toolkit for the assessment of systemic risk buildup in low income countries. We show that, due to non-linearity in the relationship between credit and financial stability, the assessment should be conducted with different tools at different stages of financial development.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Title: Systemic Risk Assessment in Low Income Countries: Balancing Financial Stability and Development\n- Authors: Daniela Marchettini, Rodolfo Maino\n- Date: August 12, 2015\n- Format: IMF Working Papers, Working Paper No. 2015/190\n- Core proposition: A toolkit for assessing systemic risk buildup in low income countries that adapts to stages of financial development."
    },
    {
      "heading": "Key findings",
      "content": "- Due to non-linearity in the relationship between credit and financial stability, systemic risk assessment should be conducted with different tools at different stages of financial development.\n- When the level of financial depth is low, traditional leading indicators of banking crises have poor predictive performance.\n- In early stages of financial development, analysis should be based on indicators that:\n  - account for financial deepening, and\n  - take into consideration countries’ structural limits.\n- The framework is used to provide a preliminary assessment of systemic risk buildup in individual SSA countries."
    },
    {
      "heading": "Toolkit and methodological emphasis",
      "content": "- Proposed: a stage-sensitive toolkit for systemic risk assessment in low income countries.\n- Emphasis on replacing or supplementing traditional Early Warning Indicators where financial depth is low.\n- Recommended indicator characteristics:\n  - capture credit growth and excess credit dynamics (including credit booms, credit bubble, credit gap measure),\n  - reflect financial deepening progress,\n  - incorporate frontier gap and structural limits specific to low income contexts."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Use different assessment tools depending on the stage of financial development rather than a one-size-fits-all Early Warning Indicator approach.\n- For countries with low financial depth:\n  - prioritize indicators that monitor financial deepening and structural capacity,\n  - adjust crisis-prediction frameworks to account for the poor predictive performance of traditional banking-crisis indicators.\n- Apply the toolkit to produce country-level preliminary assessments to inform macroprudential policy and development-oriented financial sector policy and analysis."
    },
    {
      "heading": "Subjects and keywords (as provided)",
      "content": "- Subject: Credit, Credit booms, Economic sectors, Financial crises, Financial markets, Financial sector development, Financial sector policy and analysis, Money, Systemic risk\n- Keywords: banking crisis, Credit, Credit booms, credit bubble, credit gap measure, credit growth, credit standard, Early Warning Indicators, excess credit, Financial Deepening, Financial sector development, frontier gap, Global, Sub-Saharan Africa, Systemic Risk\n\n---\n\n Content in this bundle\n\n- wp15190\n  - wp15190 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp15190 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/systemic-risk-assessment-in-low-income-countries-balancing-financial-stability-and-43196"
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    "Authors: Daniela Marchettini, Rodolfo Maino",
    "Published: August 12, 2015",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513545882.001",
    "Title: Systemic Risk Assessment in Low Income Countries: Balancing Financial Stability and Development",
    "Authors: Daniela Marchettini, Rodolfo Maino",
    "Date: August 12, 2015",
    "Format: IMF Working Papers, Working Paper No. 2015/190",
    "Core proposition: A toolkit for assessing systemic risk buildup in low income countries that adapts to stages of financial development.",
    "Due to non-linearity in the relationship between credit and financial stability, systemic risk assessment should be conducted with different tools at different stages of financial development.",
    "When the level of financial depth is low, traditional leading indicators of banking crises have poor predictive performance.",
    "In early stages of financial development, analysis should be based on indicators that:",
    "The framework is used to provide a preliminary assessment of systemic risk buildup in individual SSA countries.",
    "Proposed: a stage-sensitive toolkit for systemic risk assessment in low income countries.",
    "Emphasis on replacing or supplementing traditional Early Warning Indicators where financial depth is low.",
    "Recommended indicator characteristics:",
    "Use different assessment tools depending on the stage of financial development rather than a one-size-fits-all Early Warning Indicator approach.",
    "For countries with low financial depth:",
    "Apply the toolkit to produce country-level preliminary assessments to inform macroprudential policy and development-oriented financial sector policy and analysis.",
    "Subject: Credit, Credit booms, Economic sectors, Financial crises, Financial markets, Financial sector development, Financial sector policy and analysis, Money, Systemic risk",
    "Keywords: banking crisis, Credit, Credit booms, credit bubble, credit gap measure, credit growth, credit standard, Early Warning Indicators, excess credit, Financial Deepening, Financial sector development, frontier gap, Global, Sub-Saharan Africa, Systemic Risk",
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