This paper examines the early warning system of currency crisis in the context of Global Financial Crisis 2008. The monthly data has been taken for the period 2005-2009 for leading indicators related to external exposure (short-term debt/reserves and growth of foreign exchange reserves),...

Many estimates of early-warning-system (EWS) models of currency crisis have reported incorrect standard errors because of serial correlation in the context of panel probit regressions. This paper documents the magnitude of the problem proposes and tests a solution and applies it to previously...

This paper is an attempt to identify robust lead indicators to serve as early warning signals for a currency crisis in India. The Signals approach of Kaminsky, Lizondo, and Reinhart (KLR) 1998 is used to identify the lead indicators, and Logistic Regression is used to verify for their...

Unit root methods have long been used in detection of financial bubbles in asset prices. The basic idea is that fundamental changes in the autocorrelation structure of relevant time series imply the presence of a rational price bubble. We provide cross-country evidence for performance of...

Die internationalen Finanzmärkte wurden in den letzten Jahren von einer Reihe folgenschwerer Währungskrisen heimgesucht. Zahlreiche Vorschläge für eine effizientere Krisenprävention werden seither diskutiert. Eine zentrale Idee ist die stärkere Nutzung von Frühwarnsystemen zur...

This paper shows that agents underreact to rare and extreme signals. Agents observing these signals choose delay, hoping to condition their behavior on future actors (who may themselves also delay). This stalemate prevents society from recognizing the presence of rare states, even when the...

Eurosystem macroprudential policies require shared action between national authorities and the European Central Bank (ECB). This has created the need for a common basis for macroprudential analysis, and as a result the Macroprudential Database (MPDB) was created by the ECB and the European...

The sovereign debt crisis in the euro area has increased the interest in early warning indicators, with the aim to indicate the build up of fiscal stress early on and to facilitate crisis prevention by a timely counteraction of fiscal and macroeconomic policies. This paper presents possible...

The sovereign debt crisis in the euro area has raised interest in early warning indicators, aimed at signalling the build-up of fiscal stress in advance and helping prevent crises by means of a timely counteraction of fiscal and macroeconomic policies. This paper presents possible improvements...

We propose a modeling framework which allows for creating probability predictions on a future market crash in the medium term, like sometime in the next five days. Our framework draws upon noticeable similarities between stock returns around a financial market crash and seismic activity around...