A Model to Assess the Probabilities of Growth, Fiscal, and Financial Crises

By Suman S Basu, Marcos d Chamon, Christopher W. Crowe

December 14, 2017

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Suman S Basu, Marcos d Chamon, and Christopher W. Crowe A Model to Assess the Probabilities of Growth, Fiscal, and Financial Crises, (USA: International Monetary Fund, 2017) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper summarizes a suite of early warning models to assess the probabilities of growth, fiscal, and financial crises in advanced economies and emerging markets. We estimate separate signal-extraction models for each type of crisis and sample of countries, and we use our results to generate “histories of vulnerabilities” for countries, regions, and the world. For the global financial crisis, our models report that vulnerabilities in advanced economies were rooted in the bursting of leveraged bubbles, while vulnerabilities in emerging markets stemmed from lengthy booms in credit and asset prices combined with growing weaknesses in the corporate and external sectors.

Subject: Asset prices, Balance of payments, Financial crises, Financial statements, Global financial crisis of 2008-2009, Prices, Public financial management (PFM), Sudden stops

Keywords: Asset prices, Crisis incidence, Crisis probability, Early warning model, Financial crisis, Financial crisis model, Financial statements, Fiscal crisis, Global, Global financial crisis of 2008-2009, Growth crisis, Probability rating, Sudden stop, Sudden stops, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/282
Stock No:

WPIEA2017282
ISBN:

9781484333143
ISSN:

1018-5941

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