• DOI:10.1016/J.JIMONFIN.2013.01.001
• Corpus ID: 18761719

Leading Indicators of Crisis Incidence: Evidence from Developed Countries

@article{Babeck2012LeadingIO,
  title={Leading Indicators of Crisis Incidence: Evidence from Developed Countries},
  author={Jan Babeck{\'y} and Tom{\'a}{\vs} Havr{\'a}nek and Jakub Matĕj̊u and Marek Rusn{\'a}k and Kateřina {\vS}m{\'i}dkov{\'a} and Bořek Va{\vs}{\'i}{\vc}ek},
  journal={ERN: Other Macroeconomics: Prices},
  year={2012}
}

• Jan Babecký, T. Havránek, +3 authors Bořek Vašíček
• Published 17 October 2012
• Economics
• ERN: Other Macroeconomics: Prices

We examine which indicators are most useful in explaining the cost of economic crises in EU and OECD countries between 1970 and 2010. To define the dependent variable we combine a measure of costs to the economy, which consists of the output and employment loss and the fiscal deficit, with a database of crisis occurrence designed specifically for this task. We take into account model uncertainty in two steps. First, for each potential leading indicator we select the relevant prediction horizon by using panel vector autoregression. Second, we identify the most useful leading indicators with Bayesian model averaging. Our results suggest that domestic housing prices, share prices, and credit growth, and some global variables, such as private credit, constitute important sources of risk.