How to predict financial stress?: FB3-5/2017-32E-PDF
An assessment of Markov switching models /
"This paper predicts phases of the financial cycle by using a continuous financial stress measure in a Markov switching framework. The debt service ratio and property market variables signal a transition to a high financial stress regime, while economic sentiment indicators provide signals for a transition to a tranquil state. Whereas the in-sample analysis suggests that these indicators can provide an early warning signal up to several quarters prior to the respective regime change, the out-of-sample findings indicate that most of this performance is owing to the data gathered during the global financial crisis. Comparing the prediction performance with a standard binary early warning model reveals that the Markov switching model is outperforming the vast majority of model specifications for a horizon up to three quarters prior to the onset of financial stress."--Abstract, p. ii.
|Department/Agency||Bank of Canada.|
|Title||How to predict financial stress?|
|Subtitle||An assessment of Markov switching models /|
|Series Title||Bank of Canada staff working paper,|
|Publication Type||Series - View Master Record|
|Electronic Document|| |
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|Number of Pages||ii, 46 p.|
|Subject Terms||Economic analysis|
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