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Assessing Thailand’s financial vulnerability: An early warning approach

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  • Hong Puah, Chin
  • Kuek, Tai Hock
  • Arip, M. Affendy

Abstract

This paper intends to assess financial vulnerability in Thailand through the construction of a financial vulnerability indicator (FVI). This early warning system has been developed using the signals approach proposed by Kaminsky and Reinhart (1999), followed by composite indicator construction. The period under study spans from January 2000 through to December 2016. Our empirical findings indicate that exports has the lowest noise-to-signal ratio (0.13), followed by real GDP (0.15) and house price index (0.20). These suggest that financial crises are usually preceded by a weakening in exports, a slowdown in the economy and a decline in house price. For Thailand, four major financial episodes are successfully outlined during the study period, demonstrating the effectiveness of an early warning system in financial vulnerability forecasting.

Suggested Citation

  • Hong Puah, Chin & Kuek, Tai Hock & Arip, M. Affendy, 2017. "Assessing Thailand’s financial vulnerability: An early warning approach," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 13(4), October.
    • Handle: RePEc:ags:pdcbeh:285104
    DOI: 10.22004/ag.econ.285104
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    Cited by:

    1. Tai-Hock Kuek & Chin-Hong Puah & M. Affendy Arip, 2019. "Predicting Financial Vulnerability in Malaysia: Evidence From the Signals Approach," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 89-98, December.
    2. MARKOVIĆ Milan & MARJANOVIĆ Ivana, 2022. "Vulnerability To The Currency Crisis: The Case Of Serbia," Management of Sustainable Development, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 14(2), pages 17-21, December.
    3. Soh, Ann-Ni, 2020. "A Review on the Leading Indicator Approach towards Economic Forecasting," MPRA Paper 103854, University Library of Munich, Germany.
    4. Tai-Hock Kuek & Chin-Hong Puah & M. Affendy Arip, 2020. "Financial Vulnerability and Economic Dynamics in Malaysia," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 55-73.

    More about this item

    Keywords

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    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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