We analyze the determinants of individual bank failures arising from solvency and liquidity shortages in a stylized banking system following Krause and Giansante (2012) where banks are characterized by the amount of capital, cash reserves and their exposure to the interbank loan market as...

The paper applies quantile regression technique, specifically, quantile vector autoregression to stochastic debt sustainability analysis (DSA) and the construction of public debt fan charts. Stochastic approach to DSA typically uses standard ordinary least squares vector autoregression (OLS VAR)...

Traditional approaches use balance sheet assessment to forecast bank rescue costs and often underestimate real costs. Thus, governments commit to bailouts without credible forecasts of costs, which can lead to serious fiscal issues. We propose a new approach based on distributional information...

Asset encumbrance is a central concept in the context of banks’ liquidity crises, as it is associated with their capacity to obtain secured funding. This occasional paper summarises the work carried out by the task force on asset encumbrance, bringing together analyses by the ECB and those...

The main contribution of this paper is the construction of a cyclical systemic risk indicator from early warning indicators of banking crises (EWIs) used in Finland. Previous research has shown that combining EWIs can enhance their early warning properties. This study evaluates the indicator's...

This paper identifies leading indicators of fiscal crises based on a large sample of countries at different stages of development over 1970-2015. Our results are robust to different methodologies and sample periods. Previous literature on early warning sistems (EWS) for fiscal crises is scarce...

Standard early warning models to predict bank failures cannot be estimated during periods of few or zero failures, precluding any updating of such models during times of good performance. Here we address this problem using an alternative approach, forecasting the simple leverage ratio...

We develop a debt-to-GDP forecasting framework incorporating the classical debt accounting relationship relating the debt-to-GDP ratio to its previous period value, the growth rate of the economy, the government cost of debt service, and the primary balance. We present a linearization of the...

In several recent studies unit root methods have been used in detection of financial bubbles in asset prices. The basic idea is that fundamental changes in the autocorrelation structure of relevant time series imply the presence of a rational price bubble. We provide cross-country evidence for...

In several recent studies unit root methods have been used in detection of financial bubbles in asset prices. The basic idea is that fundamental changes in the autocorrelation structure of relevant time series imply the presence of a rational price bubble. We provide cross-country evidence for...