Research on Financial Crisis Warning Based on Vulnerability Index

Abstract

After the global financial crisis in 2008, the early warning of financial crisis has become a necessary and urgent issue. It is of great significance to analyze the factors affecting financial crisis and clarify the relationship between credit growth, housing price fluctuation, current account deficit and financial risk in order to objectively and accurately predict the degree of influence of financial risk. This paper takes 41 global economies, including developed economies and emerging economies, from 1980 to 2019 as research objects, and analyzes the early warning ability of financial vulnerability indicators such as credit growth, housing price and current account deficit in a unified framework through panel Logit model. It is found that credit is not the only important indicator to predict crisis: when housing price, current account deficit and credit are under the same research framework, housing price and current account deficit have a lot of leading information, which can predict the occurrence of financial crisis; However, as house prices and current account deficits are added to the model, the early-warning power of credit is significantly lower than that of house prices. Paying attention to house price fluctuations and current account deficits has some implications for future policy making. In view of this, we should do a good job of cross-cycle policy adjustment, persist in curbing real estate financialization and bubbles, pay close attention to the direction and extent of current account adjustment, and prudently manage related financial risks.