Identifying Banking Crises Dates

31 Pages Posted: 1 Mar 2011 Last revised: 26 Oct 2011

See all articles by Pearpilai Jutasompakorn

Pearpilai Jutasompakorn

Monash University

Sirimon Treepongkaruna

The University of Western Australia; Financial Research Network (FIRN)

Robert D. Brooks

Monash University; Financial Research Network (FIRN)

Date Written: March 2010

Abstract

This paper identifies banking crises dates based on market information embedded in banking stocks. Specifically, we estimate returns on banking indices around the world using a Markov Switching Autoregressive (MS-AR) model to capture regime shift behaviour in both the mean and variance from 1995 to 2010 with the sample of 77 countries. Overall, we find evidence of three regimes (bull/bear/crisis) and identify banking crisis dates in the majority of countries examined. The crisis regime is characterized by higher volatility and lower stock returns. Finally, our MS-AR modelling offers an alternative ex-ante method of crisis dates identification and our identified crisis dates are, in general, consistent with the IMF’s ex-post crisis date classification.

Keywords: Banking crisis, crisis dates, Markov switching, three regimes, Banking system stock return

JEL Classification: C58, G01, G21

Suggested Citation

Jutasompakorn, Pearpilai and Treepongkaruna, Sirimon and Brooks, Robert Darren, Identifying Banking Crises Dates (March 2010). Systemic Risk, Basel III, Financial Stability and Regulation, 2011. Available at SSRN: https://ssrn.com/abstract=1773423 or http://dx.doi.org/10.2139/ssrn.1773423

Pearpilai Jutasompakorn (Contact Author)

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

Sirimon Treepongkaruna

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
+61864887853 (Phone)
+61864881086 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Robert Darren Brooks

Monash University ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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