Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153816
Authors: 
Sarlin, Peter
Peltonen, Tuomas A.
Year of Publication: 
2011
Series/Report no.: 
ECB Working Paper 1382
Abstract: 
The paper uses the Self-Organizing Map for mapping the state of financial stability and visualizing the sources of systemic risks as well as for predicting systemic financial crises. The Self-Organizing Financial Stability Map (SOFSM) enables a two-dimensional representation of a multidimensional financial stability space that allows disentangling the individual sources impacting on systemic risks. The SOFSM can be used to monitor macro-financial vulnerabilities by locating a country in the financial stability cycle: being it either in the pre-crisis, crisis, post-crisis or tranquil state. In addition, the SOFSM performs better than or equally well as a logit model in classifying in-sample data and predicting out-of-sample the global financial crisis that started in 2007. Model robustness is tested by varying the thresholds of the models, the policymaker’s preferences, and the forecasting horizons.
Subjects: 
macroprudential supervision
prediction
Self-Organizing Map (SOM)
Systemic financial crisis
systemic risk
visualization
JEL: 
E44
E58
F01
F37
G01
Document Type: 
Working Paper

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