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An optimal early warning system for currency crises under model uncertainty
Central Bank Review, Volume: 20, Issue: 3, Pages: 99 - 107
Swansea University Author: Hany Mohamed
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DOI (Published version): 10.1016/j.cbrev.2020.03.002
Abstract
This paper assesses several early warning (EWS) models of financial crises to propose a model that can predict the incidence of a currency crisis in developing countries. For this purpose, we employ the equal weighting (EW) and dynamic model averaging (DMA) approaches to combine forecast from indivi...
| Published in: | Central Bank Review |
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| ISSN: | 1303-0701 |
| Published: |
Elsevier BV
2020
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| Online Access: |
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| URI: | https://cronfa.swan.ac.uk/Record/cronfa53817 |
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| Abstract: |
This paper assesses several early warning (EWS) models of financial crises to propose a model that can predict the incidence of a currency crisis in developing countries. For this purpose, we employ the equal weighting (EW) and dynamic model averaging (DMA) approaches to combine forecast from individual models allowing for time-varying weights. Taking Egypt as a case study and focusing only on currency crises, our findings show that combined forecast (EW- and DMA-based EWS) to account for uncertainty perform better than other competing models in both in-sample and out-of-sample forecasts. |
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| Keywords: |
Financial Crises, Currency Crises, Early Warning, Uncertainty, Egypt |
| College: |
Faculty of Humanities and Social Sciences |
| Issue: |
3 |
| Start Page: |
99 |
| End Page: |
107 |