IDEAS home Printed from
   My bibliography  Save this book chapter

Early Warning Indicators of Economic Crises

In: CNB Financial Stability Report 2011/2012


  • Jan Babecky
  • Tomas Havranek
  • Jakub Mateju
  • Marek Rusnak
  • Katerina Smidkova
  • Borek Vasicek


Monitoring a suitable set of early warning indicators is crucial for the optimal timing of macroprudential measures aimed at reducing the risk of financial crises or at least mitigating their impact on the economy. This article sets out to identify the indicators that should be monitored and to show how to overcome some problems in identifying them. As it is important to focus on robust indicators that are independent of the choice of model, the article combines two mutually complementary crisis measures: the timing of crisis occurrence and the intensity of the impact of crises on the economy. The article goes on to demonstrate that it is appropriate to rely on a system of several complementary models. For a set of 40 advanced EU and OECD countries, our two-model system identifies rising house prices and external debt as the best performing early warning indicators. Global variables, such as the volume of credit, global GDP and crude oil prices, form another useful set of indicators.

Suggested Citation

  • Jan Babecky & Tomas Havranek & Jakub Mateju & Marek Rusnak & Katerina Smidkova & Borek Vasicek, 2012. "Early Warning Indicators of Economic Crises," Occasional Publications - Chapters in Edited Volumes,in: CNB Financial Stability Report 2011/2012, chapter 0, pages 112-117 Czech National Bank, Research Department.
  • Handle: RePEc:cnb:ocpubc:fsr1112/2

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Graciela L. Kaminsky, 1998. "Currency and banking crises: the early warnings of distress," International Finance Discussion Papers 629, Board of Governors of the Federal Reserve System (U.S.).
    2. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    3. Andrew K. Rose & Mark M. Spiegel, "undated". "Cross-Country Causes and Consequences of the 2008 Crisis: Early Warning," Working Papers 6, Department of the Treasury, Ministry of the Economy and of Finance.
    4. Detken, Carsten & Alessi, Lucia, 2009. "'Real time'early warning indicators for costly asset price boom/bust cycles: a role for global liquidity," Working Paper Series 1039, European Central Bank.
    5. Martin Feldkircher & Stefan Zeugner, 2009. "Benchmark Priors Revisited; On Adaptive Shrinkage and the Supermodel Effect in Bayesian Model Averaging," IMF Working Papers 09/202, International Monetary Fund.
    6. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    7. Grammatikos, Theoharry & Vermeulen, Robert, 2012. "Transmission of the financial and sovereign debt crises to the EMU: Stock prices, CDS spreads and exchange rates," Journal of International Money and Finance, Elsevier, vol. 31(3), pages 517-533.
    8. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
    9. Jeffrey A. Frankel & George Saravelos, 2010. "Are Leading Indicators of Financial Crises Useful for Assessing Country Vulnerability? Evidence from the 2008-09 Global Crisis," NBER Working Papers 16047, National Bureau of Economic Research, Inc.
    10. Reinhart, Carmen M. & Rogoff, Kenneth S., 2013. "Banking crises: An equal opportunity menace," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4557-4573.
    11. Kaminsky, Graciela L., 2006. "Currency crises: Are they all the same?," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 503-527, April.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Ionita Rodica -Oana, 2013. "Economic And Financial Periods Induced Through Banking System," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 997-1009, July.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cnb:ocpubc:fsr1112/2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jan Babecky). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.