early warning models of banking crises

Calibrating macroprudential policy

Policy proposals on the new international standards for bank capital and liquidity are being debated without any methodical evaluation of their effects on both crisis probabilities and concurrent social costs. Using data for 14 OECD economies for the years 1980 Ð 2007, we conduct a systematic evaluation of crisis determinants and find that bank capital adequacy, liquidity, the current account deficit and changes in house prices are the principal factors associated with OECD banking crises. There is no evidence of procyclical risks being generated by credit or GDP growth.