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A Peer-reviewed scientific articles/A1 Journal article (refereed), original research
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On the long-run calibration of the credit-to-GDP gap as a banking crisis predictor, Finnish Economic Papers 2 (2020). Kauko, Karlo; Tölö, Eero

Category A Peer-reviewed scientific articles
Sub-category A1 Journal article (refereed), original research
auki Internal authors
Tölö Eero / Macroprudential Analysis Division
All authors as text Kauko, Karlo; Tölö, Eero 
Number of authors
Status Published
Year of publication 2020 
Date 30.11.2020 
Name of article On the long-run calibration of the credit-to-GDP gap as a banking crisis predictor 
Name of journal Finnish Economic Papers
Volume of issue 29 
Number of issue
Abstract The credit-to-GDP gap is a widely used early warning indicator of banking crises. It has become standard to calculate this trend deviation with a one-sided Hodrick-Prescott filter that uses a much larger value for the smoothing parameter λ than commonly applied in most business-cycle studies. We recalibrate the smoothing parameter with panel data covering almost one-and-a-half centuries of data. As a result, the 2008 crisis does not dominate the results and sample length helps contain filter initialization problems, i.e. most observations are preceded by decades of data. The optimal λ is found to be much lower than previously suggested.
Free text descriptor in Finnish pankkikriisit; ennakoivat varoittimet; luottokanta-BKT; ennusteet; indikaattorit; luotot; bruttokansantuote 
Free text descriptor in English banking crises, early warning, credit-to-GDP gap 
JEL-codes G01, E44, N20 
ISSN / e-ISSN 0784-5197 
auki Internet addresses
Notes BoF DP 6/2019 

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