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After the onset of the East Asian financial crisis, the interest in early warning system has been revived. While there are different causes to which crises can be attributed, early warning system can be utilized to predict its emergence via monitoring of key economic variables. Thus, policymakers are granted sufficient time to implement policy measures meant to minimize the adverse impacts of the crisis, if not to completely curb it. Although there are other methods to identify possible indicators, like the probability approach, the EWS developed by Kaminsky and Reinhart, is used in this paper because of various issues the probability approach are not capable of addressing. The concept of EWS is then applied to the Philippines. The study has identified two episodes of currency crises: October 1983 and September 1997. However, the computation of time-series probabilities is slightly modified. Results lend validity to the hypothesis of self-fulfilling crisis.

Citations

This publication has been cited time(s).

Lin, Chin-Shien et. al, 2006 "A new approach to modeling early warning systems for currency crises: Can a machine-learning fuzzy expert system predict the currency crises effectively?" , Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo
Boitan, Iustina, 2012 "Development of an early warning system for evaluating the credit portfolio's quality: A case study on Romania" , Prague University of Economics and Business
Lamberte, Mario B. and Josef T. Yap, 2001 "Monitoring economic vulnerability and performance: Applications to the Philippines" , Philippine Institute for Development Studies
Lin, Chin-Shien et. al, 2008 "A new approach to modeling early warning systems for currency crises: Can a machine-learning fuzzy expert system predict the currency crises effectively?" , Elsevier
Lin, Chin-Shien et. al, 2006 "A new approach to modeling early warning systems for currency crises: Can a machine-learning fuzzy expert system predict the currency crises effectively?" , CIRJE, Faculty of Economics, University of Tokyo

Contributor

Philippine Institute for Development Studies

Authors

Yap, Josef T.

Keywords

early warning system; self-fulfilling crisis

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Jul 06, 2013

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