Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/230674
Authors: 
Dieckelmann, Daniel
Year of Publication: 
2021
Series/Report no.: 
Diskussionsbeiträge No. 2021/6
Abstract: 
Using new quarterly U.S. data for the past 120 years, I show that sudden reversals in equity and credit market sentiment approximated by several measures of corporate securities issuance are highly predictive of banking crises and recessions. Deviations in equity issuance from historical averages also help to explain economic activity over the business cycle. Crises and recessions often occur independently of domestic leverage, making the credit-to-GDP gap a deficient early-warning indicator historically. The fact that equity issuance reversals predict banking crises without elevated private credit levels, suggests that changes in investor sentiment can trigger financial crises even in the absence of underlying banking fragility.
Subjects: 
Corporate securities issuance
market sentiment
nancial fragility
banking crises
recessions
JEL: 
E32
G01
G32
G41
N11
N12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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