How to Foresee Banking Crises? A Survey of the Empirical Literature

Posted: 29 Oct 2015


A survey of the empirical literature on early warning indicators of banking crises is presented. Descriptive analyses have been published for decades, but cross-national panel data analyses have only been performed since the late 1990s. More recently, the severity of the subprime-Lehman crisis has been compared across countries. Most findings corroborate the view that during a typical build-up phase, banks borrow internationally to finance domestic lending, boosting the current account deficit and causing a real estate bubble. Increasing debt and imbalances lead to a crisis. Both developing and developed countries have experienced these kinds of boom-bust cycles.

Keywords: Banking crisis, Financial crisis, Early warning, Financial instability

JEL Classification: E44, G01, G17, N10

Suggested Citation

Kauko, Karlo, How to Foresee Banking Crises? A Survey of the Empirical Literature. Economic Systems, Vol. 38, No. 3, 2014, Available at SSRN:

Karlo Kauko (Contact Author)

Bank of Finland ( email )

P.O. Box 160
FIN-00101 Helsinki

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