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Early Warning Systems for Currency Crises with Real-Time Data

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

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 focus on eight Latin American and Central and Eastern European countries, distinguishing an estimation period 1990{2009 and a prediction period 2010{2014. We apply two varieties of early warning systems: the signal approach and the logit model. For bothmethods we nd that using early estimates in the predictions worsens the ability of early warning systems to signal crises compared to the most recently available information.

Suggested Citation

  • Tjeerd M. Boonman & Jan P.A.M. Jacobs & Gerard H. Kuper & Alberto Romero, 2017. "Early Warning Systems for Currency Crises with Real-Time Data," CIRANO Working Papers 2017s-18, CIRANO.
    • Handle: RePEc:cir:cirwor:2017s-18
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    References listed on IDEAS

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    Cited by:

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    2. Baker Shnekat & Ghazi Al-Assaf, 2020. "The Impact of Political Stability on the Effectiveness of the Early Warning Systems in Predicting the Financial Crises: The Case of Jordan and Qatar," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 398-407, July.
    3. Alonso-Alvarez, Irma & Molina, Luis, 2023. "How to foresee crises? A new synthetic index of vulnerabilities for emerging economies," Economic Modelling, Elsevier, vol. 125(C).
    4. Nihat Tak & Adem Gök, 2022. "Dating currency crises and designing early warning systems: Meta‐possibilistic fuzzy index functions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3773-3790, July.

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    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G01 - Financial Economics - - General - - - Financial Crises
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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