Some Policy Issues Regarding an Early Warning System

In focusing on the 24 month window prior to the onset of the crisis, the criteria for ranking the indicators presented in our related work does not distinguish between a signal given 12 months prior to the crisis and one given one month prior to the crisis. In what follows we examine this issue, by tabulating for each of the monthly indicators the average number of months in advance of the crisis when the first signal occurs; this, of course, does not preclude the fact that the indicator may continue to give signals through the entire period immediately preceding the crisis. Indeed, for the more reliable indicators signals tend to become increasingly persistent ahead of crises.