Mathias Drehmann and Mikael Juselius — Evaluating early warning indicators of banking crises: Satisfying policy requirements

The Great financial Crisis came, for a lot of economists, out of the blue. The BIS (Bank for International Settlements) has investigated a whole lot of ‘early warning indicators’. And it seems that financial crises are predictable after all. And guess what – ‘debt’ is not neutral. And neither is money (to be more precise: the shares of different kinds of money:”cross-border liabilities plus M3 minus M2 (proxy for non-core liabilities) divided by M2 (proxy for core liabilities“). Might it have been the case that some people who did predict the crisis did look at such variables?

Real-World Economics Review Blog
How to predict a financial crisis, BIS-edition
Merijn Knibbe

BIS Working Papers No 421
Evaluating early warning indicators of banking crises: Satisfying policy requirements
Mathias Drehmann and Mikael Juselius

August 2013