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Early Warning Systems for Currency Crises with Real-Time Data

Author

Listed:
  • Tjeerd M. Boonman

    (Banco de México)

  • Jan P. A. M. Jacobs

    (University of Groningen
    University of Tasmania
    CAMA
    CIRANO)

  • Gerard H. Kuper

    (University of Groningen)

  • Alberto Romero

    (Banco de México)

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.

Suggested Citation

  • Tjeerd M. Boonman & Jan P. A. M. Jacobs & Gerard H. Kuper & Alberto Romero, 2019. "Early Warning Systems for Currency Crises with Real-Time Data," Open Economies Review, Springer, vol. 30(4), pages 813-835, September.
    • Handle: RePEc:kap:openec:v:30:y:2019:i:4:d:10.1007_s11079-019-09530-0
    DOI: 10.1007/s11079-019-09530-0
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    More about this item

    Keywords

    Real time data; Early warning system; Currency crises; Signal approach; Logit model; Emerging economies;
    All these keywords.

    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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