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Title:Robust Lessons about Practical Early Warning Systems PDF Logo
Authors:Beckmann, Daniela
Menkhoff, Lukas
Sawischlewski, Katja
Issue Date:2005
Series/Report no.:Diskussionspapiere des Fachbereichs Wirtschaftswissenschaften, Universität Hannover 322
Abstract:Early warning systems (EWSs) are subject to restrictions that apply to exchange rates in general: fundamentals matter but their influence is small and unstable. Despite this limitation four major lessons emerge: First, EWSs have robust forecasting power and thus help policy-makers to prevent crises. Second, policy-makers must decide about some EWSs' elements, such as the sensitivity of the forecasts. Third, EWSs' performance is increased by taking a logit model, shorter samples and a regional approach. Fourth, the finding of contagion may motivate policy to shield its economy against inefficient international financial markets.
Subjects:early warning system
currency crises
emerging markets
JEL:F31
F37
F33
Document Type:Working Paper
Appears in Collections:Diskussionspapiere, Wirtschaftswissenschaftliche Fakultät, Universität Hannover

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