An optimal early warning system for currency crises under model uncertainty
Mamdouh Abdelsalam () and
Hany Abdel-Latif ()
Central Bank Review, 2020, vol. 20, issue 3, 99-107
This paper assesses several early warning (EWS) models of financial crises to propose a model that can predict the incidence of a currency crisis in developing countries. For this purpose, we employ the equal weighting (EW) and dynamic model averaging (DMA) approaches to combine forecast from individual models allowing for time-varying weights. Taking Egypt as a case study and focusing only on currency crises, our findings show that combined forecast (EW- and DMA-based EWS), to account for uncertainty, perform better than other competing models in both in-sample and out-of-sample forecasts.
Keywords: Financial crises; Currency crises; Early warning; Uncertainty; Egypt (search for similar items in EconPapers)
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Working Paper: An optimal early warning system for currency crises under model uncertainty (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:cebare:v:20:y:2020:i:3:p:99-107
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