{
  "title": "Predicting Financial Crises: The Role of Asset Prices",
  "publication": "IMF Working Papers, August 4, 2023",
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  "summary": "We explore the early warning properties of a composite indicator which summarizes signals from a range of asset price growth and asset price volatility indicators to capture mispricing of risk in asset markets.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Objective: Explore the early warning properties of a composite indicator that summarizes signals from a range of asset price growth and asset price volatility indicators to capture mispricing of risk in asset markets.\n- Sample: quarterly panel of 108 advanced and emerging economies over 1995-2017.\n- Core result: The combination of rapid asset price growth and low asset price volatility is a good predictor of future financial crises."
    },
    {
      "heading": "Data and Methodology",
      "content": "- Indicator composition: combines asset price growth and asset price volatility measures to detect mispricing of risk.\n- Frequency and scope: quarterly data; 108 economies; sample period 1995-2017.\n- Prediction horizon: focuses on probability of entering a crisis within the next three years.\n- Comparative benchmarks: contrasted with credit-based early warning metrics.\n- Evaluation metrics referenced: ROC (implied by keywords)."
    },
    {
      "heading": "Key Findings",
      "content": "- Elevated values of the composite indicator significantly increase the probability of entering a crisis within the next three years relative to normal times when the indicator is not elevated.\n- The asset-price-based indicator outperforms credit-based early warning metrics.\n- The result is robust across:\n  - prediction horizons,\n  - methodological choices,\n  - income groups (advanced and emerging economies)."
    },
    {
      "heading": "Implications for Policymakers",
      "content": "- Measures based on asset prices can offer critical information about systemic risk levels to policymakers.\n- Monitoring rapid asset price growth together with low asset price volatility can provide early warning signals of elevated systemic risk.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2023/08/03/predicting-financial-crises-the-role-of-asset-prices-536491"
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    "Authors: Tristan Hennig, Plamen K Iossifov, Richard Varghese",
    "Published: August 4, 2023",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400248498.001",
    "Objective: Explore the early warning properties of a composite indicator that summarizes signals from a range of asset price growth and asset price volatility indicators to capture mispricing of risk in asset markets.",
    "Sample: quarterly panel of 108 advanced and emerging economies over 1995-2017.",
    "Core result: The combination of rapid asset price growth and low asset price volatility is a good predictor of future financial crises.",
    "Indicator composition: combines asset price growth and asset price volatility measures to detect mispricing of risk.",
    "Frequency and scope: quarterly data; 108 economies; sample period 1995-2017.",
    "Prediction horizon: focuses on probability of entering a crisis within the next three years.",
    "Comparative benchmarks: contrasted with credit-based early warning metrics.",
    "Evaluation metrics referenced: ROC (implied by keywords).",
    "Elevated values of the composite indicator significantly increase the probability of entering a crisis within the next three years relative to normal times when the indicator is not elevated.",
    "The asset-price-based indicator outperforms credit-based early warning metrics.",
    "The result is robust across:",
    "Measures based on asset prices can offer critical information about systemic risk levels to policymakers.",
    "Monitoring rapid asset price growth together with low asset price volatility can provide early warning signals of elevated systemic risk.",
    "**Working Paper**"
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