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Early Warning Indicators for a Financial Crises. The Case of Romania

Radu Soviani ()
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Radu Soviani: The Academy of Economic Studies, Bucharest

Hyperion Economic Journal, 2014, vol. 2, issue 3, 45-63

Abstract: This paper analyses the early signs in the economy that has the ability to predict that a financial crisis is due to happen because of the macroeconomic indicators deterioration and how other economic indicator signals the distress in the state of the economy. We specify the macroeconomic indicators we follow and we identify the symptoms associated with the associated disorder, as it is described by the economic literature as indicators that use to predict some of the internal crisis (currency, banking, balance of payment, all crisis at once). We see the dynamics of this indicators and we compare them with the the dynamics of the best leading indicators for a crisis, that were able to predict a crisis nationally, regionally or globally. We choose 7 early warning indicators that provided in-time valid signals about a crises in Romania, and we define a composite indicator for showing the distress of the economy (as each indicator can give a particular signal of distress, while the composite indicator shows the imminence of the Romanian Financial Crises of 2008-2010).

Keywords: Exchange Rate; financial crisis; currency crisis; balance of payment Crisis (search for similar items in EconPapers)
JEL-codes: E52 E58 G01 (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:hyp:journl:v:2:y:2014:i:3:p:45-63