Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/217632
Authors: 
Asanović, Željka
Year of Publication: 
2017
Citation: 
[Journal:] Journal of Central Banking Theory and Practice [ISSN:] 2336-9205 [Volume:] 6 [Issue:] 3 [Publisher:] De Gruyter Open [Place:] Warsaw [Year:] 2017 [Pages:] 157-182
Publisher: 
De Gruyter Open, Warsaw
Abstract: 
Very high costs of systemic banking crises emphasize the importance of early warning models for these crises. In order to create an early warning model for systemic banking crises a combined approach is implemented. The first approach applied in this paper is signal approach, however, with some modifications as compared with its standard application in the literature. On the basis of individual indicators two composite indices are created. Unlike other papers in this field, the author has chosen a 24-month period before the beginning of the crisis as a signal horizon, while the signal horizon in the literature is usually considered to be a period of 12 months before and 12 months after the crisis onset. The second approach represents logit model whereas the independent variables are actually the indicators with the best performances obtained within the signal approach. In order to check the robustness of indicators, the Bayesian model averaging technique is used. The indicator that represents the credit growth rate, besides being a part of the composite index, is statistically significant in all estimated specifications of the logit model, including the technique of Bayesian model averaging. Additionally, trends in the international market have a significant influence on the domestic banking system and its stability, and hence also on the probability of occurrence of a systemic banking crisis.
Subjects: 
early warning models
systemic banking crises
Montenegrin banking system
signal approach
composite index
logit model
Bayesian model averaging
synthesis of signal and logit approach
credit expansion
economic cycle.
JEL: 
G01
C25
C11
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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