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Economic resilience: The usefulness of early warning indicators in OECD countries [electronic resource] / Mikkel Hermansen and Oliver Röhn = Résilience économique : L'utilité des indicateurs d'alerte rapide dans des pays de l'OCDE / Mikkel Hermansen et Oliver Röhn.

Author/Creator:
Hermansen, Mikkel, author
Other Title:
Résilience économique : L'utilité des indicateurs d'alerte rapide dans des pays de l'OCDE
Publication:
Paris : OECD Publishing, 2015.
Series:
OECD Economics Department Working Papers 18151973 ; no.1250.
OECD Economics Department Working Papers 18151973 ; no.1250
Format/Description:
Government document
Book
1 online resource (30 pages)
Subjects:
Economics.
Summary:
The global financial crisis and the high associated costs have revived the academic and policy interest in "early warning indicators" of crises. This paper provides empirical evidence on the usefulness of a new set of vulnerability indicators, proposed in a companion paper (Röhn and others, 2015), in predicting severe recessions and crises in OECD countries. To evaluate the usefulness of the indicators the signalling approach is employed, which takes into account policy makers' preferences between missing crises and false alarms. Our empirical evidence shows that the majority of indicators would have helped to predict severe recessions in the 34 OECD economies and Latvia between 1970 and 2014. Indicators of global risks consistently outperform domestic indicators in terms of their usefulness, highlighting the importance of taking international developments into account when assessing a country's vulnerabilities. In the domestic areas, indicators that measure asset market imbalances (real house and equity prices, house price-to-income and house price-to-rent ratios), also perform consistently well both in and out-of sample. Domestic credit related variables appear particularly useful in signalling upcoming banking crises and in predicting the global financial crisis out-of-sample. The results are broadly robust to different definitions of costly events, different forecasting horizons and different time and country samples.
Notes:
Title from title screen (viewed May 1, 2017).
Contributor:
Röhn, Oliver.
SourceOECD (Online Service)
Access Restriction:
Restricted for use by site license.
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