Systemic Financial Crises, Balance Sheets, and Model Uncertainity

October 1, 2001

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Format: Chicago

Melvyn Weeks, and Mark R. Stone Systemic Financial Crises, Balance Sheets, and Model Uncertainity, (USA: International Monetary Fund, 2001) accessed October 18, 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

This paper empirically examines the probability and intensity of financial crises during the 1990s with a view to informing crisis prevention and mitigation policies. The econometric analysis uses a decision-theoretic approach, rather than the more standard general-to-specific approach, to address the high degree of model uncertainty. The results affirm the importance of balance sheets in the probability and intensity of financial crises, especially corporate balance sheet stresses and foreign exchange liquidity shortfalls. Model uncertainty is a bigger problem for estimating crisis intensity compared to crisis probability.

Subject: Balance of payments, Capital inflows, Financial crises, Financial statements, Foreign exchange, Legal support in revenue administration, Public financial management (PFM), Revenue administration

Keywords: Bank crisis, Capital inflows, Crisis channel, Crisis indicator, Crisis intensity, Crisis prevention policy, Crisis probability, Currency crisis, East Asia, Europe, Financial reform, Financial statements, Indicator group, Legal support in revenue administration, Middle East, Mitigation policy, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/162
Stock No:

WPIEA1622001
ISBN:

9781451857870
ISSN:

1018-5941

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