Abstract
Utilizing a simple time-varying hazard model, we incorporate nationwide and state-level economic variables with banking-industry and bank-level data to examine U.S. bank failures during 1977-2019. We find that bank-level financial conditions are more essential in predicting bank failure, although macro factors affect the failure likelihood of vulnerable banks. We also find that banking-industry market variables are significant predictors. Unlike bank systemic funding cost whose predictive power is subsumed in the presence of macroeconomic variables, banking-industry market performance has a significantly independent predictive power on bank failure. This finding is novel to existing literature of bank-failure forecast and has important policy implications.
| Original language | English |
|---|---|
| Pages (from-to) | 1212-1234 |
| Number of pages | 23 |
| Journal | Journal of Forecasting |
| Volume | 43 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - Aug 2024 |
Bibliographical note
Publisher Copyright:© 2024 The Authors. Journal of Forecasting published by John Wiley & Sons Ltd.
Open Access - Access Right Statement
© 2024 The Authors. Journal of Forecasting published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License (https://creativecommons.org/licenses/by-nc-nd/4.0/), which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.Keywords
- bank failure
- macroeconomic conditions
- failure prediction
- hazard model
