Currency Crisis Early Warning Systems: Why They should be Dynamic
AbstractTraditionally, nancial crisis Early Warning Systems (EWSs) rely on macroeconomic leading indicators to forecast the occurrence of such events. This paper extends such discrete-choice EWSs by taking into account the persistence of the crisis phenomenon. The dynamic logit EWS is estimated using an exact maximum likelihood estimation method both in a time series and panel form. This model's forecasting abilities are then scrutinized by using an evaluation methodology recently designed speci cally for EWSs. When applied for predict- ing currency crises for 16 countries, this new EWS turns out to exhibit signi cantly better predictive abilities than the existing static one, both in- and out-of -sample, thus supporting the use of dynamic speci cations for EWSs for nancial crises.
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Bibliographic InfoPaper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-161.
Length: 41 pages
Date of creation: 25 Feb 2014
Date of revision:
dynamic models; currency crisis; Early Warning System.;
Other versions of this item:
- Candelon Bertrand & Dumitrescu Elena-Ivona & Hurlin Christophe, 2010. "Currency Crises Early Warning Systems: why they should be Dynamic," Research Memorandum 047, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-30 (All new papers)
- NEP-CBA-2014-03-30 (Central Banking)
- NEP-DCM-2014-03-30 (Discrete Choice Models)
- NEP-ECM-2014-03-30 (Econometrics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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