Early Warning systems for banking crises: Political and economic stability

Alireza Tamadonejad, Mariani Abd Majid, Aisyah Abdul Rahman, Mansor Jusoh

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Early Warning System (EWS) is a system that tries to predict the probability of crises using environmental factors. This study seeks to develop an EWS for the probability of systemic banking crises in East Asian countries by using a logit model taking into account a wide range of political and economic factors. Results reveal that short-term debt and exchange rate depreciation may trigger speculative attacks during political instability, economic slowdown, and inefficient regulatory environments. Policymakers and regulators may be able to prevent crises by stabilizing political and economic conditions. Furthermore, results indicate that government instability, corruption, high short-term debt, unstable monetary and fiscal policies do not only reduce investors' confidence but also prevent effective crisis prevention strategies. Therefore, by adopting the EWS the government would be able to monitor environmental changes causing crises.

Original languageEnglish
Pages (from-to)31-38
Number of pages8
JournalJurnal Ekonomi Malaysia
Volume50
Issue number2
DOIs
Publication statusPublished - 2016

Fingerprint

Banking crisis
Political stability
Early warning system
Economic stability
Government
Short-term debt
Political instability
Politicians
Speculative attacks
Environmental factors
Corruption
Economics
Economic factors
Depreciation
Trigger
Investors
Environmental change
Confidence
Regulatory environment
Logit model

Keywords

  • Early Warning System (EWS)
  • East Asia
  • Political stability
  • Systemic banking crises

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)

Cite this

Early Warning systems for banking crises : Political and economic stability. / Tamadonejad, Alireza; Abd Majid, Mariani; Abdul Rahman, Aisyah; Jusoh, Mansor.

In: Jurnal Ekonomi Malaysia, Vol. 50, No. 2, 2016, p. 31-38.

Research output: Contribution to journalArticle

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