The recent spate of banking and currency crises has underscored the need to develop early warning systems. These are based on economic indicators of vulnerability, which can be identified from models and theories of crises. First generation models focus on the inconsistency of macroeconomic policies and the exchange rate peg. Second generation models revolve around the possibility of self-fulfilling crises and multiple equilibria. Meanwhile, the 1997 East Asian financial crisis spawned research on third-generation models, which integrated balance sheets of banks and corporations in the framework of second-generation models. The next step is then to combine all the variables in a meaningful way that will allow the prediction of economic crises. There are two popular approaches: the probability model using limited dependent variables estimation and the signals approach of Kaminsky and Reinhart. Both these methodologies have their own advantages and disadvantages but their usefulness is constrained by the availability and timeliness of high-frequency data.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Philippine Institute for Development Studies in its series Discussion Papers with number
DP 2002-13.
References listed on IDEAS 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.:
Did you know? Each page is provided with a technical contact, in case something is not right with the supplied information. See under "publisher info".