The Bank for International Settlements, Basel
A working paper from the Bank for International Settlements tests several possible methods to improve the baseline credit-to-GDP gap’s effectiveness as an early warning indicator.
Mathias Drehmann and James Yetman acknowledge that credit-to-GDP gaps have drawbacks, despite their use in frameworks for setting the Basel III counter-cyclical capital buffer.
The Hodrick-Prescott filter used in the measure’s construction can create “spurious dynamics”, they say. The HP filter also suffers from “end
You are currently unable to print this content. Please contact [email protected] to find out more.
You are currently unable to copy this content. Please contact [email protected] to find out more.
Original Source
