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Working Paper 190 - Early Warning Systems and Systemic Banking Crises in Low Income Countries: A Multinomial Logit Approach


The recent global financial crisis has stimulated new interest among academics and policy makers in models aimed at providing alerts about the risk of the onset of a systemic banking crisis based on systematic theoretical and empirical analysis, the so-called early warning systems (EWSs). While most of the focus has been on advanced economies (Barrell et al, 2010; Babecký et al; 2013), which have been at the epicenter of the recent turmoil, the relevant empirical literature has devoted scant attention to low income countries (LICs). This is surprising as LICs experienced a number of costly banking crises, especially during the 80s and 90s, which took longer to resolve than in other groups of economies.

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