Robust Lessons about Practical Early Warning Systems

Daniela Beckmann (), Lukas Menkhoff and Katja Sawischlewski

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: Early warning systems (EWSs) are subject to restrictions that apply to exchange rates in general: fundamentals matter but their influence is small and unstable. Despite this limitation four major lessons emerge: First, EWSs have robust forecasting power and thus help policy-makers to prevent crises. Second, policy-makers must decide about some EWSs elements, such as the sensitivity of the forecasts. Third, EWSs performance is increased by taking a logit model, shorter samples and a regional approach. Fourth, the finding of contagion may motivate policy to shield its economy against inefficient international financial markets.

Keywords: early warning system; currency crises; emerging markets (search for similar items in EconPapers)
JEL-codes: F31 F33 F37 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2005-10
New Economics Papers: this item is included in nep-fmk, nep-for and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Robust lessons about practical early warning systems (2006)
Working Paper: Robust Lessons about Practical Early Warning Systems (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:han:dpaper:dp-322

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