 Systemic event prediction by an aggregate early warning system: An application to the Czech RepublicDiana Zigraiova and Petr Jakubík Economic Systems, 2015, vol. 39, issue 4, 553-576 Abstract: This work develops an early warning framework for assessing systemic risks and predicting systemic events over a short horizon of six quarters and a long horizon of 12 quarters on a panel of 14 countries, both advanced and developing. First, we build a financial stress index to identify the starting dates of systemic financial crises for each country in the panel. Second, early warning indicators for the assessment and prediction of systemic risk are selected in a two-step approach; we find relevant prediction horizons for each indicator by a univariate logit model followed by the application of Bayesian model averaging to identify the most useful indicators. Finally, we observe the performance of the constructed EWS over both horizons on the Czech data and find that the model over the long horizon outperforms the EWS over the short horizon. For both horizons, out-of-sample probability estimates do not deviate substantially from their in-sample estimates, indicating a good out-of-sample performance for the Czech Republic. Keywords: Systemic risk; Financial stress; Financial crisis; Early warning indicators; Bayesian model averaging; Early warning system (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:39:y:2015:i:4:p:553-576 DOI: 10.1016/j.ecosys.2015.04.004 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
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