Monitoring Banking Sector Fragility : A Multivariate Logit Approach

Author/Editor:

Enrica Detragiache ; Asli Demirgüç-Kunt

Publication Date:

October 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper explores how a multivariate logit empirical model of banking crisis probabilities can be used to monitor banking sector fragility. The proposed approach relies on readily available data, and the fragility assessment has a clear interpretation based on in-sample statistics. The model has better in-sample performance than currently available alternatives, and the monitoring system can be tailored to fit the preferences of the decision maker regarding type I and type II errors. The framework can be useful as a preliminary screen to economize on precautionary costs.

Series:

Working Paper No. 99/147

Subject:

Financial crisis Indonesia Jamaica Korea, Republic of Malaysia Mexico Philippines Thailand

English

Publication Date:

October 1, 1999

ISBN/ISSN:

9781451856712/1018-5941

Stock No:

WPIEA1471999

Format:

Paper

Pages:

27

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