Development Economics: Macroeconomic Issues in Developing Economies eJournal | 2019
The Exploration of Economic Crises: Parameter Uncertainty and Predictive Ability
Abstract
Over a long horizon, this paper examines joint economic crises and determines the power of 49 variables in predicting such episodes. While incorporating dynamism in the prediction, we generate the predictive power of various specifications and model the uncertainty in the parameters of interest. The results reveal that growth of real gross domestic product per capita, regulation, bank nonâperforming loans, interest rate and inflation rate are the most significant variables in predicting the joint economic crises. These variables predict economic crises with about 93% accuracy and can predict joint economic crises in developing countries and recent joint crises.