A Model to Assess the Probabilities of Growth, Fiscal, and Financial Crises
43 Pages Posted: 21 Mar 2018
Date Written: December 2017
This paper summarizes a suite of early warning models to assess the probabilities of growth, fiscal, and financial crises in advanced economies and emerging markets. We estimate separate signal-extraction models for each type of crisis and sample of countries, and we use our results to generate 'histories of vulnerabilities' for countries, regions, and the world. For the global financial crisis, our models report that vulnerabilities in advanced economies were rooted in the bursting of leveraged bubbles, while vulnerabilities in emerging markets stemmed from lengthy booms in credit and asset prices combined with growing weaknesses in the corporate and external sectors.
Keywords: Developed countries, Emerging markets, Financial crisis, Early warning systems, Financial crises, Sudden stops, Early warning model, crisis probability, growth crisis, fiscal crisis, sudden stop, Forecasting and Simulation, Forecasting and Simulation
JEL Classification: E37, E37, F47, F47, G01, G01
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