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Jurnal Ekonomi Malaysia

54 (1) 2020 121 – 134

Early Warning Indicators for Systemic Banking Crises: Household Debt and Property Prices
Penunjuk Amaran Awal untuk Krisis Perbankan Bersistem: Hutang Isi Rumah dan Harga Perumahan

Faculty of Business Management
Universiti Teknologi MARA (UiTM) Melaka
Kampus Alor Gajah 78000 Lendu Melaka
MALAYSIA

khairunsamd84@gmail.com

Faculty of Economics, Finance and Banking
UUM College of Business
Universiti Utara Malaysia
Sintok 06010 Bukit Kayu Hitam Kedah
MALAYSIA

sitinurazira@uum.edu.my

Faculty of Economics and Muamalat
Universiti Sains Islam Malaysia (USIM)
Bandar Baru Nilai
71800 Nilai Negeri Sembilan
MALAYSIA

nuradli@usim.edu.my

Abstract

The 2008 financial crisis was the result of escalating house prices and a hasty increase in household debt. In a sample of 41 advanced and emerging countries, this paper employs a logit estimation model to examine the role of household debt and house price as indicators of systemic banking for the period of 1980 until 2018. The results confirm that a high growth in household debt and house price increase enhances the probability for crises to erupt. While this is a consistent evidence for advanced economies, an observation of emerging economies suggests that only a change in household debt and not a change in house prices may cause banking crises to erupt. Policymakers can thus design predictive EWS models based on the surge in household debt and house prices prior to the crises which would lessen, if not alleviate, the effect of upcoming economic shocks by monitoring the macroeconomic changes.

Keywords

banking crises; Early Warning Signal; house prices; Household debt; logit

Author’s Acknowledgement

We gratefully acknowledge financial support from the Malaysian Ministry of Higher Education under the Fundamental Research Grant Scheme (FRGS) (Grant
number: 600-IRMI/FRGS 5/3 (063/2017)).

http://dx.doi.org/10.17576/JEM-2020-5401-9
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Abd Samad, , Mohd Daud, , & Mohd Dali, (2020). Early Warning Indicators for Systemic Banking Crises: Household Debt and Property Prices. Jurnal Ekonomi Malaysia, 54(1), 121–134. http://dx.doi.org/10.17576/JEM-2020-5401-9

@article{abdsamad2020early,
  title={Early Warning Indicators for Systemic Banking Crises: Household Debt and Property Prices},
  author={Abd Samad, Khairunnisa and Mohd Daud, Siti Nurazira and Mohd Dali, Nuradli Ridzwan Shah},
  journal={Jurnal Ekonomi Malaysia},
  volume={54},
  number={1},
  pages={121—134},
 

year={2020},
}

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