IMF paper examines crisis indicators

IMF headquarters in Washington DC

A working paper, published by the International Monetary Fund in June, considers the usefulness of a number of indicators in providing warnings prior to a financial crisis.

The authors, Ashok Vir Bhatia and Tamim Bayoumi, use quarterly data from the Federal Reserve, starting in 1952, to assess the ability of different indicators to predict crises. The paper finds that leverage in the financial sector was ineffective in warning of crises, and instead poor-quality collateral "was the critical link

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