Critical slowing down associated with regime shifts in the US housing market

Tan, James Peng Lung; Cheong, Siew Ann

doi:10.1140/epjb/e2014-41038-1

Cited by 27 publications

(28 citation statements)

References 30 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Encouraged by the successes of early warning signals in other complex systems, some efforts have been made to explore the possibility of constructing early warnings from economic and financial time series. For instance, Tan and Cheong (2014) observed critical slowing down in the U.S. housing market. They detected strong early warning signals associated with a sequence of coupled regime shifts during the period of sub-prime mortgage loans transition and the sub-prime crisis.…”

Section: Introductionmentioning

confidence: 99%

Critical slowing down as an early warning signal for financial crises?

2018

View full text Add to dashboard Cite

Financial crises have repeatedly been coined as a potential application area in the recent literature on constructing early warning signals through identifying characteristics of critical slowing down on the basis of time series observations. To test this idea, we consider four historical financial crises-Black Monday 1987, the 1997 Asian Crisis, the 2000 Dot-com bubble burst, and the 2008 Financial Crisis-and investigate whether there is evidence for critical slowing down prior to these market collapses. We find statistical evidence for critical slowing down before Black Monday 1987, while the results are mixed or insignificant for the more recent financial crises. Keywords Time series • Bifurcations • Nonlinear dynamical systems • Critical slowing down • Early warning signal • Financial instability JEL Classification C14 • C53 • G01 B Juanxi Wang

show abstract

Section: Introductionmentioning

confidence: 99%

Critical slowing down as an early warning signal for financial crises?

2018

View full text Add to dashboard Cite

show abstract

“…Evidence supporting our assessment that the Subprime Loans Transition and the Global Financial Crisis Transition are discontinuous phase transitions comes in the form of statistical early warning signals prior to the transitions [7]. These signals work on the premise of critical slowing down, where the return rate to a stable equilibrium point decreases as the equilibrium point becomes less stable approaching a bifurcation point [8, 9].…”

Section: Introductionmentioning

confidence: 82%

The Regime Shift Associated with the 2004–2008 US Housing Market Bubble

Tan

Cheong

2016

PLoS ONE

View full text Add to dashboard Cite

The Subprime Bubble preceding the Subprime Crisis of 2008 was fueled by risky lending practices, manifesting in the form of a large abrupt increase in the proportion of subprime mortgages issued in the US. This event also coincided with critical slowing down signals associated with instability, which served as evidence of a regime shift or phase transition in the US housing market. Here, we show that the US housing market underwent a regime shift between alternate stable states consistent with the observed critical slowing down signals. We modeled this regime shift on a universal transition path and validated the model by estimating when the bubble burst. Additionally, this model reveals loose monetary policy to be a plausible cause of the phase transition, implying that the bubble might have been deflatable by a timely tightening of monetary policy.

show abstract

“…1c and d). Such critical slowing down has been observed across an array of complex dynamic systems, such as those pertaining to ecosystems (Dakos and Bascompte, 2014;Dakos et al, 2010Dakos et al, , 2012aWouters et al, 2015) climate (Dakos et al, 2008;Lenton, 2011;Lenton et al, 2012), medicine (Meisel et al, 2015;Trefois et al, 2015), and social-financial markets (Tan and Cheong, 2014).…”

Section: Introductionmentioning

confidence: 99%

Resilience changes in watershed systems: A new perspective to quantify long-term hydrological shifts under perturbations

Feng

Sun

et al. 2016

Journal of Hydrology

View full text Add to dashboard Cite

Keywords:Critical slowing down Resilience indicator Convex model Hydrological regime shift Watershed systems s u m m a r y Natural hydrological regimes are essential to the stability of river basins. While numerous efforts have been put forth to characterize flow regime alterations driven by climate change and human activities, few approaches have been proposed to explore changes in watershed resilience. The present study attempted to introduce a systematic approach that can be used to identify the resilience change of river basins based on annual river discharge through the application of a convex model and the principle of critical slowing down. Specifically, a resilience indicator (p i ) that reflects streamflow autocorrelation at a given time was proposed to represent the temporal variation of the system resilience, and annual water discharge at representative hydrological stations located in upstream, midstream, and downstream regions of a river basin was used to reflect alterations in long-term hydrological processes and the stability of river basins. The application of this method to the Yellow River basin and Yangtze River basin indicated that the system resilience was lower in downstream regions compared to upstream regions. The Yellow River basin has suffered a decrease in resilience in its lower reaches since 1971, which extended to the middle reaches in 1987 and upper reaches in 1990. Similarly, recent observation of the resilience change in the Yangtze River basin indicated that resilience in its lower reaches has likely decreased since 2002, and this low resilience extended to the middle reaches in 2005. Overall, our study presents a new method to predict potential decreases of resilience in complex large scale watershed systems where mechanistic insight is insufficient to build reliable basin-scale hydrological, climate, ecosystem integrated models.

show abstract

Critical slowing down associated with regime shifts in the US housing market

Cited by 27 publications

References 30 publications

Critical slowing down as an early warning signal for financial crises?

Critical slowing down as an early warning signal for financial crises?

The Regime Shift Associated with the 2004–2008 US Housing Market Bubble

Resilience changes in watershed systems: A new perspective to quantify long-term hydrological shifts under perturbations

Contact Info

Product

Resources

About