Leading Indicators of Systemic Banking Crises: Finland in a Panel of EU Countries

31 Pages Posted: 18 Feb 2015

See all articles by Patrizio Lainà

Patrizio Lainà

University of Helsinki, Faculty of Social Sciences, Department of Political and Economic Studies

Juho Nyholm

University of Helsinki - Department of Political and Economic Studies

Peter Sarlin

Hanken School of Economics; RiskLab Finland

Multiple version iconThere are 2 versions of this paper

Date Written: January 7, 2015

Abstract

This paper investigates leading indicators of systemic banking crises in a panel of 11 EU countries, with a particular focus on Finland. We use quarterly data from 1980Q1 to 2013Q2, in order to create a large number of macro-financial indicators, as well as their various transformations. We make use of univariate signal extraction and multivariate logit analysis to assess what factors lead the occurrence of a crisis and with what horizon the indicators lead a crisis. We find that loans-to-deposits and house price growth are the best leading indicators. Growth rates and trend deviations of loan stock variables also yield useful signals of impending crises. While the optimal lead horizon is three years, indicators generally perform well with lead times ranging from one to four years. We also tap into unique long time-series of the Finnish economy to perform historical explorations into macro-financial vulnerabilities.

Keywords: leading indicators, macro-financial indicators, banking crisis, signal extraction, logit analysis

JEL Classification: E44, F30, G01, G15, C43

Suggested Citation

Lainà, Patrizio and Nyholm, Juho and Sarlin, Peter, Leading Indicators of Systemic Banking Crises: Finland in a Panel of EU Countries (January 7, 2015). ECB Working Paper No. 1758, Available at SSRN: https://ssrn.com/abstract=2546357

Patrizio Lainà

University of Helsinki, Faculty of Social Sciences, Department of Political and Economic Studies ( email )

Helsinki
Finland
+358 9 1912 4883 (Phone)

Juho Nyholm

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

Peter Sarlin (Contact Author)

Hanken School of Economics

PO Box 479
FI-00101 Helsinki
Finland

RiskLab Finland ( email )

Turku, 20520
Finland

HOME PAGE: http://risklab.fi/people/peter/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
29
Abstract Views
425
PlumX Metrics