Early Warning Systems for Currency Crises with Real-Time Data

Tjeerd M. Boonman, Jan P. A. M. Jacobs*, Gerard H. Kuper, Alberto Romero

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

5 Citations (Scopus)
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Abstract

This paper investigates the performance of early warning systems for currency crises in real-time, using forecasts of indicators that are available at the moment predictions are to be made. We investigate two types of commonly used early warning systems for currency crises: the signal approach and the logit model. We apply each EWS to a panel of fifteen emerging economies, distinguishing an estimation period 1991Q1-2010Q4 and a prediction period 2011Q1-2017Q4. We find that using indicator forecasts in the predictions worsens the ability of early warning systems to signal crises compared to the most recently available information.

Original languageEnglish
Pages (from-to)813-835
Number of pages23
JournalOpen Economies Review
Volume30
Issue number4
DOIs
Publication statusPublished - Sep-2019

Keywords

  • Real time data
  • Early warning system
  • Currency crises
  • Signal approach
  • Logit model
  • Emerging economies
  • FORECASTING FINANCIAL CRISES
  • LEADING INDICATORS

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