Systemic Risk Assessment in Low Income Countries: Balancing Financial Stability and Development

41 Pages Posted: 14 Sep 2015

See all articles by Daniela Marchettini

Daniela Marchettini

International Monetary Fund (IMF)

Rodolfo Maino

International Monetary Fund (IMF)

Date Written: August 2015

Abstract

We propose a toolkit for the assessment of systemic risk buildup in low income countries. We show that, due to non-linearity in the relationship between credit and financial stability, the assessment should be conducted with different tools at different stages of financial development. In particular, when the level of financial depth is low, traditional leading indicators of banking crises have poor predictive performance and the analysis should be based on indicators that account for financial deepening while taking into consideration countries’ structural limits. By using this framework, we provide a preliminary assessment of systemic risk buildup in individual SSA countries.

Keywords: Early Warning Indicators, Financial Deepening, credit, bis, risk, banking, Financial Markets and the Macroeconomy, Financial Forecasting and Simulation,

JEL Classification: E44, G01, G17, G21

Suggested Citation

Marchettini, Daniela and Maino, Rodolfo, Systemic Risk Assessment in Low Income Countries: Balancing Financial Stability and Development (August 2015). IMF Working Paper No. 15/190, Available at SSRN: https://ssrn.com/abstract=2659547

Daniela Marchettini (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Rodolfo Maino

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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