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

Author Info

Listed author(s):
  • 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
Handle: RePEc:imf:imfwpa:04/52
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Keywords: Currency crises; Currencies; Foreign exchange; vulnerability indicators; crisis prediction; forecasting accuracy; balance of payments crisis; probability; predictions; currency crisis; probabilities; Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation;

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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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  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.).
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  14. Goldfajn, Ilan & Valdes, Rodrigo O., 1998. "Are currency crises predictable?," European Economic Review, Elsevier, vol. 42(3-5), pages 873-885, May.
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  16. Axel Schimmelpfennig & Nouriel Roubini & Paolo Manasse, 2003. "Predicting Sovereign Debt Crises," IMF Working Papers 03/221, International Monetary Fund.
  17. Manuel De la Rocha & Roberto Perrelli & Christian B. Mulder, 2002. "The Role of Corporate, Legal and Macroeconomic Balance Sheet Indicators in Crisis Detection and Prevention," IMF Working Papers 02/59, International Monetary Fund.
  18. Catherine A Pattillo & Andrew Berg & Gian M Milesi-Ferretti & Eduardo Borensztein, 2000. "Anticipating Balance of Payments Crises--The Role of Early Warning Systems; The Role of Early Warning Systems," IMF Occasional Papers 186, International Monetary Fund.
  19. P.J.G. Vlaar, 1999. "Currency Crises Models for Emerging Markets," WO Research Memoranda (discontinued) 595, Netherlands Central Bank, Research Department.
  20. Steven B. Kamin & John W. Schindler & Shawna L. Samuel, 2001. "The contribution of domestic and external factors to emerging market devaluation crises: an early warning systems approach," International Finance Discussion Papers 711, Board of Governors of the Federal Reserve System (U.S.).
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