Effectiveness of Early Warning Models: A Critical Review and New Agenda for Future Direction

Padhan, Rakesh and K P, Prabheesh (2019) Effectiveness of Early Warning Models: A Critical Review and New Agenda for Future Direction. Bulletin of Monetary Economics and Banking, 22 (4). pp. 457-484. ISSN 2460 - 9196

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Abstract

This paper suggests a new agenda for constructing early warning models (EWMs) toenhance their effectiveness in predicting financial crises. The central argument of thenew agenda aims to eradicate the weaknesses of existing EWMs, since their failure topredict the global financial crisis of 2007–2008 demonstrates the need to improve theirefficiency. We document the history of EWMs and propose a new agenda as follows:1) the accurate measurement of a financial crisis, 2) implementation of a fourthgenerationcrisis model to capture the dynamic nature of the financial crisis, and 3) theinclusion of interconnectedness/contagion variables as explanatory variables for thefinancial crisis.

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IITH Creators:
IITH CreatorsORCiD
K P, PrabheeshUNSPECIFIED
Item Type: Article
Subjects: Arts > Liberal arts
Divisions: Department of Liberal Arts
Depositing User: Team Library
Date Deposited: 21 Feb 2020 05:19
Last Modified: 21 Feb 2020 05:19
URI: http://raiith.iith.ac.in/id/eprint/7444
Publisher URL: https://doi.org/10.21098/bemp.v22i4.1188
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