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Handbook of Research on Financial and Banking Crisis Prediction through Early Warning Systems

Book Description

In the last decade, both developed nations and emerging economies have been rocked by the effects of global financial crises precipitated by a baffling range of causes, from sub-prime mortgage rates to outbreaks of virulent disease. Financial and governmental bodies have acknowledged the pressing need for algorithmic models capable of predicting such crises in order to inform interventionary measures, yet to date, no single model has emerged that is robust and agile enough to sufficiently meet that task while maintaining a useful signal-to-noise ratio, making them little more reliable than a carnival fortune-teller. The Handbook of Research on Financial and Banking Crisis Prediction through Early Warning Systems addresses the inequity of developed and developing nations from the bottom up through an exploration of current literature, specific case-studies, and data-based recommendations for new crisis indicators. Touching on such topics as the Greek debt crisis, electronic banking, and financial crises in developing economies, this publication targets an audience of academics, financial analysts, researchers, post-graduate students, and policymakers working in the fields of international finance and liability management.

Table of Contents

  1. Cover
  2. Title Page
  3. Copyright Page
  4. Book Series
    1. Mission
    2. Coverage
  5. Editorial Advisory Board
  6. Preface
  7. Acknowledgment
  8. Section 1: Introduction to Early Warning Systems for Banking and Financial Crises
    1. Chapter 1: Early Warning System for Banking Crisis
      1. ABSTRACT
      2. INTRODUCTION
      3. MEANING, MAIN CAUSES, AND IMPACTS OF BANKING CRISIS
      4. THE METHODOLOGIES AND INDICATORS OF BANKING CRISIS EWS
      5. CONCLUSION
      6. REFERENCES
      7. KEY TERMS AND DEFINITIONS
      8. ENDNOTES
    2. Chapter 2: Early Warning System for Financial Crises
      1. ABSTRACT
      2. 1. INTRODUCTION
      3. 2. FACTORS AND SYMPTOMS OF FINANCIAL CRISIS
      4. 3. BACKGROUND OF EARLY WARNING SYSTEM (EWS)
      5. 4. CONSTRUCTING AN EWS
      6. 5. PRACTICAL/MANAGERIAL IMPLICATIONS AND RECOMMENDATIONS
      7. 6. FUTURE RESEARCH AREAS
      8. 7. CONCLUSION
      9. REFERENCES
      10. KEY TERMS AND DEFINITIONS
    3. Chapter 3: Predicting Global Financial Meltdown and Systemic Banking Failure
      1. ABSTRACT
      2. INTRODUCTION
      3. OBJECTIVE OF THE STUDY
      4. FINANCIALISATION AND GLOBAL FINANCIAL MELTDOWN
      5. FROM FINANCIAL INSTITUTIONS TO BANKING CRISES: A THEORETICAL OVERVIEW
      6. KEY DIMENSIONS OF INTERNATIONAL FINANCIAL CRISES: A CRITICAL REVIEW OF THE LITERATURE
      7. FINANCIAL MELTDOWNS AND SYSTEMIC BANKING CRISES: UNDERSTANDING BASE MODELS AND KEY INDICATORS
      8. ASYMMETRIES OF INFORMATION IN THE FINANCIAL SYSTEM: ADVERSE SELECTION, CONTAGION, AND MORAL HAZARD
      9. EARLY WARNING SYSTEMS (EWSs): PREDICTING FINANCIAL MELTDOWN AND SYSTEMIC BANKING FAILURE
      10. IDENTIFYING THE ELEMENTS OF AN EARLY WARNING SYSTEM (EWS): KEY CONCEPTS AND DEFINITIONS
      11. THE CAUSES OF SYSTEMIC BANKING PANICS AND GLOBAL FINANCIAL CRISES: RESPONDING TO SUB-OPTIMAL TRIGGERS
      12. MACROECONOMIC VARIABLES IMPACTING FINANCIAL INSTABILITY
      13. MICROECONOMIC DISTORTIONS AND INSTITUTIONAL FAILURES
      14. UNDERSTANDING SYSTEMIC FINANCIAL OUTAGES: ON CRISIS, CONTAGION, AND CONFUSION
      15. DIRECTIONS FOR FUTURE RESEARCH
      16. CONCLUSION
      17. REFERENCES
      18. ADDITIONAL READING
      19. KEY TERMS AND DEFINITIONS
      20. ENDNOTES
    4. Chapter 4: On the Evaluation of Early Warning Models for Financial Crises
      1. ABSTRACT
      2. INTRODUCTION
      3. THE CONFUSION MATRIX AND THE NOISE-TO-SIGNAL RATIO
      4. THE LOSS FUNCTION AND USEFULNESS MEASURES
      5. THE AREA UNDER THE RECEIVER OPERATING CHARACTERISTIC (AUROC) CURVE
      6. FUTURE RESEARCH DIRECTIONS
      7. CONCLUSION
      8. REFERENCES
      9. KEY TERMS AND DEFINITIONS
      10. ENDNOTES
    5. Chapter 5: Early Warning Tools for Financial System Distress
      1. ABSTRACT
      2. INTRODUCTION
      3. TYPOLOGY OF OPERATIONAL EARLY WARNING SYSTEMS
      4. ASSESSMENT OF EWSs PERFORMANCE AND METHODOLOGICAL PROSPECTS
      5. CONCLUSIONS
      6. REFERENCES
      7. KEY TERMS AND DEFINITIONS
  9. Section 2: Indicators and Prediction Models for Banking and Currency Crises
    1. Chapter 6: Using Self Organizing Maps for Banking Oversight
      1. ABSTRACT
      2. 1. INTRODUCTION
      3. 2. LITERATURE REVIEW
      4. 3. EMPIRICAL DESIGN OF THE MODEL
      5. 4. RESULTS
      6. 5. CONCLUDING COMMENTS
      7. REFERENCES
      8. KEY TERMS AND DEFINITIONS
      9. ENDNOTES
    2. Chapter 7: Accounting Standards in the U.S. Banking Industry during the Financial Crisis
      1. ABSTRACT
      2. INTRODUCTION
      3. CONTRADICTORY RESULTS ON THE EFFECTS OF FAIR VALUE ACCOUNTING
      4. UNANSWERED RESEARCH QUESTIONS
      5. IMPLEMENTATION OF FAIR VALUE ACCOUNTING
      6. CAPITAL REGULATIONS AND CONSERVATIVE ACCOUNTING
      7. ACCOUNTING REGULATIONS: FAS 157 AND IAS 39
      8. FUTURE RESEARCH
      9. CONCLUSION
      10. REFERENCES
      11. KEY TERMS AND DEFINITIONS
    3. Chapter 8: Churn Management of E-Banking Customers by Fuzzy AHP
      1. ABSTRACT
      2. INTRODUCTION
      3. MATERIALS AND METHODS
      4. UNDERSTANDING CUSTOMER BEHAVIOUR
      5. APPROACHES DEFINED BY EXPERTS
      6. FINDINGS
      7. CONCLUSION AND FUTURE RESEARCH DIRECTIONS
      8. REFERENCES
      9. KEY TERMS AND DEFINITIONS
    4. Chapter 9: Building a Surveillance Framework for Currency Crises in Indonesia
      1. ABSTRACT
      2. INTRODUCTION
      3. THEORETICAL AND LITERATURE REVIEW
      4. DATA AND METHODOLOGY
      5. RESULTS AND DISCUSSION
      6. CONCLUSION
      7. REFERENCES
      8. KEY TERMS AND DEFINITIONS
      9. ENDNOTES
    5. Chapter 10: Currency Crisis in Developing Countries
      1. ABSTRACT
      2. INTRODUCTION
      3. 1. BACKGROUND
      4. 2. THEORETICAL FRAMEWORK
      5. 3. EMPERICAL REVIEW
      6. 4. FORECASTING CURRENCY CRISES AND EWSs
      7. 5. COSTS OF CURRENCY CRISES
      8. 6. FUTURE RESEARCH
      9. 7. CONCLUSION
      10. REFERENCES
      11. KEY TERMS AND DEFINITIONS
    6. Chapter 11: KLR Approach as an Early Warning Indicator of Turkish Currency and Banking Crisis in 2000 and 2001
      1. ABSTRACT
      2. 1. INTRODUCTION
      3. 2. BACKGROUND
      4. 3. TURKEY’S FINANCIAL CRISIS OF 2000 AND 2001
      5. 4. DATASET AND MODEL
      6. 5. FUTURE RESEARCH DIRECTIONS
      7. 6. CONCLUSION
      8. REFERENCES
      9. KEY TERMS AND DEFINITIONS
    7. Chapter 12: Dating Banking and Currency Crises in Turkey, 1990-2014
      1. ABSTRACT
      2. INTRODUCTION
      3. BACKGROUND
      4. MAIN FOCUS OF THE CHAPTER
      5. SOLUTIONS AND RECOMMENDATIONS
      6. FUTURE RESEARCH DIRECTIONS
      7. CONCLUSION
      8. REFERENCES
      9. KEY TERMS AND DEFINITIONS
      10. ENDNOTES
    8. Chapter 13: Measuring the Impact of Financial Crisis
      1. ABSTRACT
      2. INTRODUCTION
      3. BACKGROUND
      4. FINANCIAL STRESS INDEX FOR TURKEY
      5. CONCLUSION AND EVALUATION
      6. REFERENCES
      7. KEY TERMS AND DEFINITIONS
  10. Section 3: Indicators and Prediction Models for Economic and Financial Crises
    1. Chapter 14: The Resilience of Emerging Economies During the Great Recession
      1. ABSTRACT
      2. INTRODUCTION
      3. BACKGROUND: AN OVERVIEW OF THE CHANGING WORLD ECONOMIC ORDER
      4. LITERATURE REVIEW
      5. EMPIRICAL EVIDENCE
      6. SOURCES OF CONTAGION DURING THE GREAT RECESSION
      7. CONCLUSION
      8. REFERENCES
      9. KEY TERMS AND DEFINITIONS
      10. ENDNOTES
      11. APPENDIX
    2. Chapter 15: The Twin Deficit as an Early Warning Sign in Avoiding Crises
      1. ABSTRACT
      2. INTRODUCTION
      3. THE TWIN DEFICIT ROLE IN THE GREEK SOVEREIGN DEBT CRISIS
      4. STYLIZED FACTS OF THE GREEK CASE
      5. FINANCIAL VARIABLES AS EARLY WARNING SIGNALS
      6. POLICY MEASURES DEALING WITH DEFICITS AND PUBLIC DEBTS IN THE EUROZONE
      7. CONCLUSION
      8. ACKNOWLEDGMENT
      9. REFERENCES
      10. KEY TERMS AND DEFINITIONS
      11. ENDNOTES
    3. Chapter 16: Developing EWS Models for Contemporary Crises Using Extreme Value Binary Models
      1. ABSTRACT
      2. INTRODUCTION
      3. BACKGROUND
      4. MAIN FOCUS OF THE CHAPTER
      5. SOLUTIONS AND DIRECTIONS
      6. FUTURE RESEARCH DIRECTIONS
      7. CONCLUSION
      8. REFERENCES
      9. KEY TERMS AND DEFINITIONS
    4. Chapter 17: Understanding Chaos as an Indicator of Economic Stability
      1. ABSTRACT
      2. INTRODUCTION
      3. BACKGROUND
      4. ISSUES
      5. MODEL
      6. ESTIMATION
      7. FUTURE RESEARCH
      8. CONCLUSION
      9. REFERENCES
      10. KEY TERMS AND DEFINITIONS
      11. APPENDIX
    5. Chapter 18: Asset Pricing Bubbles
      1. ABSTRACT
      2. INTRODUCTION
      3. DEFINING ASSET PRICE BUBBLES
      4. IDENTIFYING THE PRICING BUBBLES
      5. HISTORICAL EVIDENCE OF BUBBLES
      6. CAUSES AND CONSEQUENCES OF ASSET PRICE BUBBLES
      7. ASSET PRICING BUBBLES AND EARLY WARNING SYSTEM
      8. POLICY IMPLICATIONS
      9. CONCLUSION
      10. REFERENCES
      11. KEY TERMS AND DEFINITIONS
    6. Chapter 19: Towards Predicting Financial Failure in Non-Profit Organisations
      1. ABSTRACT
      2. INTRODUCTION
      3. REVIEW OF LITERATURE ON PAST PREDICTION MODELS USED TO MEASURE NON-PROFIT ORGANISATION FINANCIAL VULNERABILITY
      4. THE NEED FOR GOVERNANCE-RELATED MEASURES IN MEASURING FINANCIAL VULNERABILITY
      5. CONCLUSIONS, SUGGESTIONS FOR FUTURE RESEARCH AND CONTRIBUTION
      6. REFERENCES
      7. KEY TERMS AND DEFINITIONS
    7. Chapter 20: Assessing the Financial Vulnerability of Emerging Markets
      1. ABSTRACT
      2. INTRODUCTION
      3. BACKGROUND
      4. MAIN FOCUS OF THE CHAPTER
      5. METHODOLOGY
      6. SOLUTIONS AND RECOMMENDATIONS
      7. FUTURE RESEARCH DIRECTIONS
      8. CONCLUSION
      9. REFERENCES
      10. KEY TERMS AND DEFINITIONS
      11. ENDNOTES
    8. Chapter 21: Financial Contagion in a Glance
      1. ABSTRACT
      2. INTRODUCTION
      3. BACKGROUND
      4. MAIN FOCUS OF THE CHAPTER
      5. CONTAGION PATTERNS
      6. CONTAGION PATTERNS RECOGNITION
      7. SOLUTIONS AND RECOMMENDATIONS
      8. FUTURE RESEARCH DIRECTIONS
      9. CONCLUSIONS
      10. REFERENCES
  11. Compilation of References
  12. About the Contributors