How to predict financial stress? : An assessment of Markov switching models / by Thibaut Duprey and Benjamin Klaus.: FB3-5/2017-32E-PDF
"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.
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| Department/Agency | Bank of Canada. |
|---|---|
| Title | How to predict financial stress? : An assessment of Markov switching models / by Thibaut Duprey and Benjamin Klaus. |
| Series title | Bank of Canada staff working paper, 1701-9397 ; 2017-32 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | "July 2017." Includes bibliographical references. Includes abstract in French. |
| Publishing information | [Ottawa] : Bank of Canada, 2017. |
| Author / Contributor | Duprey, Thibaut. Klaus, Benjamin. |
| Description | ii, 46 p. |
| Catalogue number |
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| Subject terms | Economic analysis |
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