Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/210877
Authors: 
Erhart, Szilard
Year of Publication: 
2019
Series/Report no.: 
ESRB Working Paper Series 102
Abstract: 
The paper investigates the life-cycle of the 2008-2009 financial crisis by linking the Macroeconomic Imbalance Procedure (MIP) Scoreboard of the European Commission to the crisis database of the European Systemic Risk Board (ESRB). The novelty of the analysis is that early warning capacity of MIP indicators is empirically tested in case of various crisis events case by case (i) Currency/Balance-of-Payment/Capital flow events, (ii) Sovereign crisis events, (iii) Banking crisis events and (iv) Significant asset price corrections in EU Member States. Furthermore, we contribute to the literature by studying the predicting power of the MIP Scoreboard in the identification of the overheating in the economy in advance of crises (preventive arm of the MIP). We found that the predictive power of the MIP Scoreboard may be twice as high to capture sovereign and Currency/Balance-of-Payment/Capital flow type of crisis events than its power to capture a banking crisis or serious asset price corrections. We confirm the results of earlier empirical studies that some MIP indicators perform relatively well (current account and net international position) in all specifications. A simple composite indicator based on the threshold breaches of MIP Scoreboard Indicators, performed in most cases as good as the best individual indicator, and hence could be considered as an input to a simple, rule based and accountable decision making.
Subjects: 
early warning system
macroeconomic imbalance procedure
signal approach
financial crisis
boom and bust
systemic risk
JEL: 
C40
G01
E44
E61
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-9472-116-7
Document Type: 
Working Paper

Files in This Item:
File
Size
345.46 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.