An integrated EWS for predicting currency vulnerabilities in CEE countries Emanuel Florin Irimin
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An integrated EWS for predicting currency vulnerabilities in CEE countries Emanuel Florin Irimin
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An integrated EWS for predicting currency vulnerabilities in CEE countries Emanuel Florin Irimin. RON/EUR evolution. Objective. to construct a flexible short term warning system capable of identifying vulnerabilities that may trigger exchange market pressure on local currencies - PowerPoint PPT Presentation
Transcript of An integrated EWS for predicting currency vulnerabilities in CEE countries Emanuel Florin Irimin
An integrated EWS for predicting currency
vulnerabilities in CEE countries
Emanuel Florin Irimin
RON/EUR evolution
Objective
• to construct a flexible short term warning system capable of identifying vulnerabilities that may trigger exchange market pressure on local currencies
• to analyze the events of the past months from the perspective of the major pressure Eastern Europe’s currencies were confronted with
Currency crises literature
Currency Crisis Literature
Models of Currency Crisis
Contagion Effects
Early Warning Systems
Formula EMP:
Currency crises definition
rr
ee
EMPti
ti
rti
ti
eti
1,
,
1,
,
,
11
otherwise
EMPifCrisis EMP
,0
2.,1
Exchange rate regimes
Crisis
The models
KLR
LOGIT
ANN
Data used
Data used
Indicators` effectiveness matrix
Crisis
(within 3 months)
No crisis
(within 3 months)
Signal was issued
A B
No signal was issued
C D
KLR Results – in sample
KLR Results – out of sample
Logit results
SIMPLE CRISIS
/CUMULATIVE
CRISIS
TRESHOLD/
PERCENTILE
RAW DATAINPUT
/BYNARY
INPUT
Out-of sample results for raw data
Out-of sample results for binary data
The Logit model
ANN architecture
Hidden layers
Output
ANN architecture
ANN out of sample performance
Comparative performance
Crisis within a three months period
Crisis within a month
The complex EWS
