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Jurnal Ekonomi Malaysia

50 (2) 2016 31 – 38

Early Warning Systems for Banking Crises: Political and Economic Stability
Sistem Amaran Awal untuk Krisis Perbankan:Kestabilan Politik dan Ekonomi

Moein Mellat Invesment Tehran
Wozra, 23 Street
Building: 5, 4th Floor East
Tehran
IRAN.

eco14477@gmail.com

School of Economics
Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi
Selangor
MALAYSIA.

mariani@ukm.edu.my

School of Management
Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi
Selangor
MALAYSIA.

eychah@ukm.edu.my

School of Economics
Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi
Selangor
MALAYSIA.

mansorj@ukm.edu.my

School of Economics
Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi
Selangor
MALAYSIA


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.

Keywords

Early Warning System (EWS); East Asia; political stability; systemic banking crises

Author’s Acknowledgement

We appreciate the research support from East Asian Development Network (EADN) and Universiti Kebangsaan Malaysian (UKM-GGPM-CMNB-133-2010).

http://dx.doi.org/10.17576/JEM-2016-5002-03
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Tamadonejad, , Abdul-Majid, , Rahman, , jusoh, , & Tabandeh, (2016). Early Warning Systems for Banking Crises: Political and Economic Stability. Jurnal Ekonomi Malaysia, 50(2), 31–38. http://dx.doi.org/10.17576/JEM-2016-5002-03

@article{tamadonejad2016early,
  title={Early Warning Systems for Banking Crises: Political and Economic Stability},
  author={Tamadonejad, Alireza and Abdul-Majid, Mariani and Rahman, aisyah and jusoh, mansor and Tabandeh, Razieh},
  journal={Jurnal Ekonomi Malaysia},
  volume={50},
  number={2},
  pages={31—38},
 

year={2016},
}

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