Early Warning Systems with Real-Time Data

Banco de México Working Papers, N° 2017-16

37 Pages Posted: 13 Nov 2017

See all articles by Tjeerd M. Boonman

Tjeerd M. Boonman

Banco de Mexico - Financial Stability Division

Jan P. A. M. Jacobs

University of Groningen - Faculty of Economics and Business

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business

Alberto Romero

Banco de México, Financial Stability Directorate

Date Written: September 1, 2017

Abstract

This paper investigates the performance of early warning systems in real-time, using forecasts of indicators that were available at the moment predictions are to be made. The study analyzes currency crises in eight Latin American and Central and Eastern European countries, distinguishing an estimation period 1990-2009 and a prediction period 2010-2014. We apply two varieties of early warning systems: the signal approach and the logit models. For both methods we find that using forecasts of the indicators worsens the predictive ability of early warning systems compared to using the most recently available information (ex post).

Keywords: Real-time data, Early warning system, Signal approach, Logit model, Emerging economies

JEL Classification: E47, G01, F31, C23, E58

Suggested Citation

Boonman, Tjeerd M. and Jacobs, Jan P.A.M. and Kuper, Gerard H. and Romero, Alberto, Early Warning Systems with Real-Time Data (September 1, 2017). Banco de México Working Papers, N° 2017-16 . Available at SSRN: https://ssrn.com/abstract=3067757 or http://dx.doi.org/10.2139/ssrn.3067757

Tjeerd M. Boonman (Contact Author)

Banco de Mexico - Financial Stability Division ( email )

Av. 5 de Mayo 18
Piso 4
Mexico City, 06059
Mexico
+52 55 5237 2000 ext 2047 (Phone)

Jan P.A.M. Jacobs

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Alberto Romero

Banco de México, Financial Stability Directorate ( email )

Av. 5 de Mayo 1
Mexico City, 06059
Mexico

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