The signals approach as an early warning system has been fairly successful in detecting crises, but it has so far failed to gain popularity in the scientific community because it does not distinguish between randomly achieved in-sample fit and true predictive power. To overcome this obstacle, we...

The signals approach as an early warning system has been fairly successful in detecting crises, but it has so far failed to gain popularity in the scientific community because it does not distinguish between randomly achieved in-sample fit and true predictive power. To overcome this obstacle, we...

European authorities and scholars published proposals on which indicators of macroeconomic imbalances might be used to uncover risks for the sustainability of public debt in the European Union. We test the ability of four proposed sets of indicators to send early-warnings of debt crises using a...

In the present paper, we build a bivariate semiparametric dynamic panel model to reproduce the joint dynamics of sovereign ratings and government bond yields. While the individual equations resemble Pesaran-type cointegration models, we allow for different long-run relationships in both...

Were real effective exchange rates (REER) of Euro area member countries drastically misaligned at the outbreak of the global financial crisis? The answer is difficult to determine because economic theory gives no simple guideline for determining the equilibrium values of real exchange rates, and...