Article: article from journal or magazin.
Measuring Aggregate Risk: Can We Robustly Identify Asset-Price Boom-Bust Cycles?
Journal of Banking and Finance
We investigate the extent to which it is possible to detect asset-price booms and banking crises according to alternative identification strategies and we assess their robustness. We find some evidence that house price-booms are more likely to turn into costly recession or to trigger a banking crisis than stock-price booms. Resorting both to a non-parametric approach and a discrete-choice (logit) model, we analyze the ability of a wide set of indicators to robustly explain costly asset-price booms. According to our results, real long-term interest rates and real stock prices tend to increase the probability of a costly housing-price boom, whereas real GDP tends to increase the probability of a costly stock-price boom. Interestingly, the credit-to-GDP gap indicator, sometimes put forward in the literature as a key reference for setting countercyclical capital buffers, does not seem to be a robust leading indicator of costly booms or banking crises.
Early warning indicators, Discrete-choice model, Asset price booms and busts, Macro-prudential policy, Leaning against the wind policies
Web of science
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