Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212706
Authors: 
Sarlin, Peter
Peltonen, Tuomas A.
Year of Publication: 
2011
Series/Report no.: 
BOFIT Discussion Papers 18/2011
Abstract: 
The paper uses the Self-Organizing Map for mapping the state of financial stability and visualizing the sources of systemic risks on a two-dimensional plane 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 and thus 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 horizon.
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-713-9
Document Type: 
Working Paper

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