Mapping the State of Financial Stability
44 Pages Posted: 22 Aug 2011
There are 2 versions of this paper
Mapping the State of Financial Stability
Date Written: July 27, 2011
Abstract
The paper uses the Self-Organizing Map for mapping the state of financial stability and visualizing the sources of systemic risks on a two-dimensional plane as well as for predicting systemic financial crises. The Self-Organizing Financial Stability Map (SOFSM) enables a two-dimensional representation of a multidimensional financial stability space and thus allows disentangling the individual sources impacting on systemic risks. The SOFSM can be used to monitor macro-financial vulnerabilities by locating a country in the financial stability cycle: being it either in the pre-crisis, crisis, post-crisis or tranquil state. In addition, the SOFSM performs better than or equally well as a logit model in classifying in-sample data and predicting out-of-sample the global financial crisis that started in 2007. Model robustness is tested by varying the thresholds of the models, the policymaker’s preferences, and the forecasting horizon.
Keywords: systemic financial crisis, systemic risk, self-organizing maps, visualisation, prediction, macroprudential supervision
JEL Classification: E44, E58, F01, F37, G01
Suggested Citation: Suggested Citation
Do you want regular updates from SSRN on Twitter?
Recommended Papers
-
Monetary Policy and Asset Price Volatility
By Ben S. Bernanke and Mark Gertler
-
Asset Prices, Financial and Monetary Stability: Exploring the Nexus
-
Boom-Busts in Asset Prices, Economic Instability, and Monetary Policy
By Michael D. Bordo and Olivier Jeanne
-
Boom-Busts in Asset Prices, Economic Instability and Monetary Policy
By Michael D. Bordo and Olivier Jeanne
-
Whither Monetary and Financial Stability? The Implications of Evolving Policy Regimes
-
U.S. Stock Market Crashes and Their Aftermath: Implications for Monetary Policy
-
Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870-2008
By Moritz Schularick and Alan M. Taylor
-
Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870-2008
By Moritz Schularick and Alan M. Taylor
-
Securing Sustainable Price Stability: Should Credit Come Back from the Wilderness?