Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/268235 
Year of Publication: 
2022
Series/Report no.: 
Jena Economic Research Papers No. 2022-007
Publisher: 
Friedrich Schiller University Jena, Faculty of Economics and Business Administration, Jena
Abstract: 
This study provides the first attempt to evaluate whether a logit early warning system (EWS) for systemic banking crises can produce better predictions when political indicators are used alongside traditional macro-financial indicators. Based on a dataset covering 32 advanced economies for the period 1975-2017, we show that the inclusion of political indicators helps improve the predictive performance of the model. While the improvement is small, it is statistically significant and consistent for several different performance measures and robustness tests. Among the newly employed political variables, variables indicating the political ideology of the ruling party and the time in office of the incumbent chief executive show significant correlations with the likelihood of systemic banking crises. The results suggest that a systemic banking crisis is less likely when the government is left-wing and when the chief executive officer has been in office longer.
Subjects: 
early warning systems
systemic banking crises
vulnerability
political indicators
macro-financial indicators
JEL: 
C35
C53
E60
F37
G01
G28
Document Type: 
Working Paper

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