Monitoring Banking Sector Fragility: A Multivariate Logit Approach
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Summary:
This paper explores how a multivariate logit empirical model of banking crisis probabilities can be used to monitor banking sector fragility. The proposed approach relies on readily available data, and the fragility assessment has a clear interpretation based on in-sample statistics. The model has better in-sample performance than currently available alternatives, and the monitoring system can be tailored to fit the preferences of the decision maker regarding type I and type II errors. The framework can be useful as a preliminary screen to economize on precautionary costs.
Series:
Working Paper No. 1999/147
Subject:
Banking crises Commercial banks Financial crises Financial institutions Financial services Real interest rates Systemic crises
English
Publication Date:
October 1, 1999
ISBN/ISSN:
9781451856712/1018-5941
Stock No:
WPIEA1471999
Pages:
27
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