Identifying Indicators of Systemic Risk

42 Pages Posted: 17 Aug 2019 Last revised: 3 Mar 2021

See all articles by Benny Hartwig

Benny Hartwig

Goethe University Frankfurt

Christoph Meinerding

Deutsche Bundesbank

Yves Stephan Schüler

Deutsche Bundesbank

Multiple version iconThere are 2 versions of this paper

Date Written: August 14, 2019

Abstract

We operationalize the definition of systemic risk provided by the IMF, BIS, and FSB and derive a two-stage hierarchical hypothesis test to identify indicators of systemic risk. Applying the framework to a set of candidate variables for 45 countries, we detect two credit-based financial cycle variables that, by and large, pass our test. However, for many other variables, including the Basel III credit-to-GDP gap, we find that elevated systemic risk is signaled by high values in some countries and by low values in others. More generally, our results suggest that, ex ante, systemic risk can be clearly identified only once the turning points of indicators have been observed.

Keywords: Systemic risk, macroprudential regulation, forecasting, growth-at-risk, financial cycles

JEL Classification: E37, E44, G17

Suggested Citation

Hartwig, Benny and Meinerding, Christoph and Schüler, Yves Stephan, Identifying Indicators of Systemic Risk (August 14, 2019). Available at SSRN: https://ssrn.com/abstract=3437285 or http://dx.doi.org/10.2139/ssrn.3437285

Benny Hartwig

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Christoph Meinerding

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Yves Stephan Schüler (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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