Seminar - "An Early Warning Model for Financial Stress Events"
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Seminar - "An Early Warning Model for Financial Stress Events"
DateandTime: 2014-06-24 14:23:11

Speaker: Li Fuchun, Financial Stability Department, Bank of Canada

Date: June 30, 2014

Time: 3:00 p.m.

Location: Room 401, Run Run Shaw Science Building, Central Campus

Sponsor: Center for Economic Research of Shandong University

 

Abstract:

The objective of this paper is to propose an early warning system that can predict the likelihood of occurrence of financial stress events within a given period of time. To achieve this goal, the signal extraction approach proposed by Kaminsky, Lizondo and Reinhart (1998) is used to monitor the evolution of a number of economic indicators that tend to exhibit an unusual behavior in the periods preceding a financial stress event. Based on the individual indicators, we propose three different composite indicators, the summed composite indicator, the extreme composite indicator, and the weighted composite indicator. In-sample forecasting results indicate that the three composite indicators are useful tools for predicting financial stress events.  The out-of-sample forecasting results suggest that for the most countries including Canada, the weighted composite indicator performs better than the two others across all criteria considered.

 

 

For further information, please visit: http://www.cer.sdu.edu.cn/articleshow.php?id=3078




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