ECB paper presents new financial crisis early warning system

Warning sign

A new early warning system could detect systemic financial crises well in advance, according to a working paper published by the European Central Bank.

In Anticipating the bust: a new cyclical systemic risk indicator to assess the likelihood and severity of financial crises, Jan Hannes Lang, Cosimo Izzo, Stephan Fahr and Josef Ruzicka present what they call the domestic cyclical systemic risk indicator, or d-SRI.

The model aggregates five categories of systemic risk indicator. These measure

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