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Comparing Parametric and Non-parametric Early Warning Systems for Currency Crises in Emerging Market Economies, Fabio Comelli

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
Table Of Contents
Cover; Contents; I. Introduction; II. Related Literature; III. Methodology; A. Parametric EWS; B. Non-parametric EWS; IV. Results; A. Parametric EWS; Tables; 1. Parametric and Non-parametric EWS: Fixed Effects Logit Model; B. Non-parametric EWS; 2. Non-parametric EWS: January 1995 - December 2006; V. Comparing Performances of EWS; 3. Non-parametric EWS: January 1995 - December 2007; 4. Non-parametric EWS: January 1995 - December 2008; A. The Policymaker Assigns Equal Weights To Type 1 and Type 2 Errors; 5. The Policymaker Assigns Equal Weights To Type 1 and Type 2 Errors
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (30 p.)
Specific Material Designation
Form Of Item

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