AN ANALYSIS OF THE METHODS USED FOR DEVISING EARLY WARNING SYSTEMS FOR CURRENCY CRISES

Abstract

Currency crises may appear and propagate under many forms, a fact which led to their analysis through various methods. The need to predict systemic crises has led to the creation of a monitoring instrument known as the early warning system - EWS. The early warning system used for currency crises makes it possible to predict the appearance of a crisis within a well-defined period of time. Such a method may be applied both for currency crises, as well as for banking or fiscal ones. This method consists in the analysis of economic and financial indicators that facilitate the collection of information related to the potential vulnerability of the payment balance or to the non-sustainability of the exchange rate.

Keywords

• currency crisis indicators.
• early warning system (EWS)
• signal-based approach
• methods of a logit/probit type
• methods used for analysing the impact of a currency crisis
• currency market pressure indicators
• currency crisis indicators