Finnish researchers propose new crisis indicator

The Bank of Finland

The short-term ratio of credit-to-GDP is a strong indicator of an oncoming banking crisis, a new paper from the Bank of Finland says.

In Banking crisis prediction with differenced relative credit, authors Karlo Kauko and Eero Tölö find various versions of the credit-to-GDP ratio could be used successfully as early warning signals in the eurozone.

Many organisations, such as the European Systemic Risk Board, use the ‘Basel gap’ to predict banking crises, which is the variation between the

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