DP 2019-11
Towards Inclusive Social Protection Program Coverage in the Philippines: Examining Gender Disparities
DP 2019-10
The Philippines' Voluntary National Review on the Sustainable Development Goals
PN 2019-11
Effects of TRAIN Fuel Excise Taxes on Goods and Prices
PN 2019-10
Impacts of TRAIN Fuel Excise Taxes on Employment and Poverty
Publication Detail
DP 2001-11: Monitoring Economic Vulnerability and Performance: Applications to the Philippines

The recent spate of banking and currency crises has underscored the need to develop early warning systems. These are based on economic indicators of vulnerability, which can be identified from models and theories of crises. First generation models focus on the inconsistency of macroeconomic policies and the exchange rate peg. Examples of economic indicators derived from this framework are the fiscal deficit, growth of money supply, current account balance and the level of foreign exchange reserves. Second generation models revolve around the possibility of self-fulfilling crises and multiple equilibria. Meanwhile, the 1997 East Asian financial crisis spawned research on third-generation models, which integrated balance sheets of banks and corporations in the framework of second-generation models. The next step is then to combine all the variables in a meaningful way that will allow the prediction of economic crises. There are two popular approaches: the probability model using limited dependent variables estimation and the signals approach of Kaminsky and Reinhart. Both these methodologies have their own advantages and disadvantages but their usefulness would be constrained by the availability and timeliness of high-frequency data.

Philippine Institute for Development Studies
Authors Keywords
Lamberte, Mario B.; Yap, Josef T.; early warning system; currency and banking crisis; leading indicators; economic vulnerability;
Download PDF Number of Downloads
Published in 2001 and available in the PIDS Library or can be downloaded as full text Downloaded 1,026 times since November 25, 2011