Assessing Early Warning Systems: How Have They Worked in Practice?

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Abstract: Since 1999, IMF staff have been tracking several early warning system (EWS) models of currency crisis. The results have been mixed. One of the long-horizon models has performed well relative to pure guesswork and to available non-model-based forecasts, such as agency ratings and private analysts' currency crisis risk scores. The data do not speak clearly on the other long-horizon EWS model. The two short-horizon private sector models generally performed poorly.
[JEL F31, F47]