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Assessing Early Warning Systems; How Have they Worked in Practice?

Author Info

  • Andrew Berg
  • Eduardo Borensztein
  • Catherine A. Pattillo

Abstract

Since 1999, the IMF''s staff has been tracking several early-warning-system (EWS) models of currency crisis. The results have been mixed. One of the long-horizon models has performed well relative to pure guesswork and to available non-model-based forecasts, such as agency ratings and private analysts'' currency crisis risk scores. The data do not speak clearly on the other long-horizon EWS model. The two short-horizon private sector models generally performed poorly.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/52.

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Length: 45
Date of creation: 01 Mar 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/52
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Keywords: Economic indicators; Economic forecasting; Forecasting models; probability; currency crises; predictions; currency crisis; probabilities; prediction; pre-crisis; contagion; forecasting; crisis countries; standard errors; goodness of fit; crisis probabilities; crisis probability; asian crisis; surveys; early warning system; early warning systems; statistical tests; speculative attacks; models of currency crisis; correlation; exchange rate crisis; payments crisis; standard error; statistical significance; rating agencies; banking crisis; banking crises; probability model; estimation period; crisis episodes; balance of payments crisis; currency depreciation; samples; crisis country; crisis in emerging markets; nonlinear model; financial crisis; standard deviations; credit booms; statistical method; debt crisis; computation; financial crises; corporate sector; survey; mexican peso crisis; recession; econometrics; equation; autocorrelation; crisis index; number of variables; probability value; correlations; discriminant analysis; type 1 errors; parsimonious model; type 2 errors;

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Find related papers by JEL classification:
  • F31 - International Economics - - International Finance - - - Foreign Exchange
  • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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  12. Andrew Berg & Catherine Pattillo, 1999. "Are Currency Crises Predictable? A Test," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 1.
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  16. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May.
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  18. Axel Schimmelpfennig & Nouriel Roubini & Paolo Manasse, 2003. "Predicting Sovereign Debt Crises," IMF Working Papers 03/221, International Monetary Fund.
  19. A. Berg & C. Pattillo, 1999. "What Caused the Asian Crises: An Early Warning System Approach," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 28(3), pages 285-334, November.
  20. Catherine A. Pattillo & Andrew Berg & Gian-Maria Milesi-Ferretti & Eduardo Borensztein, 2000. "Anticipating Balance of Payments Crises; The Role of Early Warning Systems," IMF Occasional Papers 186, International Monetary Fund.
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