The Contribution of Economic Data to Bank-Failure Models
FDIC Working Paper No. 2003-03
32 Pages Posted: 3 Mar 2006
Date Written: August 2003
Abstract
The wave of bank failures during the late 1980s and early 1990s was caused in part by a series of regional recessions. This paper examines whether the FDIC can use state-level economic data to forecast bank failures and finds that these data do not improve models that use only bank-level data. The paper also proposes a number of explanations for the lack of improvement.
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