Comparing Parametric and Non-parametric Early Warning Systems for Currency Crises in Emerging Market Economies /
The purpose of this paper is to compare in-sample and out-of-sample performances of three parametric and non-parametric early warning systems (EWS) for currency crises in emerging market economies (EMs). The parametric EWS achieves superior out-of-sample results compared to the non-parametric EWS, a...
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| Format: | Journal |
| Language: | English |
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Washington, D.C. :
International Monetary Fund,
2013.
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| Series: | IMF Working Papers; Working Paper ;
No. 2013/134 |
| Online Access: | Full text available on IMF |
| Summary: | The purpose of this paper is to compare in-sample and out-of-sample performances of three parametric and non-parametric early warning systems (EWS) for currency crises in emerging market economies (EMs). The parametric EWS achieves superior out-of-sample results compared to the non-parametric EWS, as the total misclassification error of the former is lower than that of the latter. In addition, we find that the performances of the parametric and non-parametric EWS do not improve if the policymaker becomes more prudent. From a policy perspective, the policymaker faces the standard trade-off when using EWS. Greater prudence allows the policymaker to correctly call more crisis episodes, but this comes at the cost of issuing more false alarms. The benefit of correctly calling more currency crises needs to be traded off against the cost of issuing more false alarms and of implementing corrective macroeconomic policies prematurely. |
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| Item Description: | <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required |
| Physical Description: | 1 online resource (29 pages) |
| Format: | Mode of access: Internet |
| ISSN: | 1018-5941 |
| Access: | Electronic access restricted to authorized BRAC University faculty, staff and students |