Monitoring Banking Sector Fragility: A Multivariate Logit Approach | Zendy

Aslı Demirgüç-Kunt | Zendy; Enrica Detragiache | Zendy

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Monitoring Banking Sector Fragility: A Multivariate Logit Approach

Author(s) -

Aslı Demirgüç-Kunt,

Enrica Detragiache

Publication year - 2000

Publication title -

the world bank economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 1.542

H-Index - 89

eISSN - 1564-698X

pISSN - 0258-6770

DOI - 10.1093/wber/14.2.287

Subject(s) - fragility , economics , logit , econometrics , multivariate statistics , logistic regression , financial fragility , business , actuarial science , statistics , macroeconomics , financial crisis , mathematics , chemistry

This article explores how a multivariate logit model of the probability of a banking crisis can be used to monitor banking sector fragility. The proposed approach relies on readily available data, and the fragility assessment has a clear interpretation based on in sample statistics. The model has better in-sample performance than currently available alternatives, and the monitoring system can be tailored to fit the preferences of decision makers regarding type I and type II errors. The framework can be useful as a preliminary screen to economize on precautionary costs.

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