Systemic Risk Assessment in Low Income Countries: Balancing Financial Stability and Development

August 12, 2015

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Format: Chicago

Daniela Marchettini, and Rodolfo Maino. Systemic Risk Assessment in Low Income Countries: Balancing Financial Stability and Development, (USA: International Monetary Fund, 2015) accessed December 26, 2024

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

We propose a toolkit for the assessment of systemic risk buildup in low income countries. We show that, due to non-linearity in the relationship between credit and financial stability, the assessment should be conducted with different tools at different stages of financial development. In particular, when the level of financial depth is low, traditional leading indicators of banking crises have poor predictive performance and the analysis should be based on indicators that account for financial deepening while taking into consideration countries’ structural limits. By using this framework, we provide a preliminary assessment of systemic risk buildup in individual SSA countries.

Subject: Credit, Credit booms, Economic sectors, Financial crises, Financial markets, Financial sector development, Financial sector policy and analysis, Money, Systemic risk

Keywords: Banking crisis, Credit, Credit booms, Credit bubble, Credit gap measure, Credit growth, Credit standard, Early Warning Indicators, Excess credit, Financial Deepening, Financial sector development, Frontier gap, Global, Sub-Saharan Africa, Systemic Risk

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/190
Stock No:

WPIEA2015190
ISBN:

9781513545882
ISSN:

1018-5941

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