Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212440 
Year of Publication: 
2019
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 6/2019
Publisher: 
Bank of Finland, Helsinki
Abstract: 
The trend deviation of the Credit-to-GDP ratio ("Basel gap") is a widely used early warning indicator of banking crises. It is calculated with the one-sided Hodrick-Prescott filter using an extremely large value of the smoothing parameter λ. We recalibrate the smoothing parameter with panel data covering almost one and a half centuries and 15 countries. The optimal λ is found to be much lower than previously suggested. The 2008 crisis does not dominate the results. The long sample almost eliminates filter initialisation problems.
JEL: 
G01
E44
N20
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-264-8
Document Type: 
Working Paper

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