The European Commission’s Scoreboard of Macroeconomic Imbalances – The Impact of Preferences on an Early Warning System

Tobias Knedlik

No 10/2012, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: The European Commission's Scoreboard of Macroeconomic Imbalances is a rare case of a publicly released early warning system (EWS). That allows for analyzing the preferences of the involved politicians with regard to the two potential errors of an EWS - missing a crisis and issuing a false alarm. This is done for the first time for EWS in general by using a standard signals approach including a preference-based optimization approach to set thresholds. It is shown that in general, the thresholds of the scoreboard are set low (resulting in more alarm signals) as compared to a neutral stand.

Keywords: early warning system; scoreboard; preferences; incentives; political economy; Frühwarnsysteme; Scoreboard; Präferenzen; Anreize; Politische Ökonomie (search for similar items in EconPapers)
JEL-codes: F47 F53 G01 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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