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An alternative method to measure the likelihood of a financial crisis in an emerging market

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  • Özlale, Ümit
  • Metin-Özcan, Kıvılcım

Abstract

This paper utilizes an early warning system in order to measure the likelihood of a financial crisis in an emerging market economy. We introduce a methodology, where we can both obtain a likelihood series and analyze the time-varying effects of several macroeconomic variables on this likelihood. Since the issue is analyzed in a non-linear state space framework, the extended Kalman filter emerges as the optimal estimation algorithm.

Suggested Citation

  • Özlale, Ümit & Metin-Özcan, Kıvılcım, 2007. "An alternative method to measure the likelihood of a financial crisis in an emerging market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 381(C), pages 329-337.
    • Handle: RePEc:eee:phsmap:v:381:y:2007:i:c:p:329-337
    DOI: 10.1016/j.physa.2007.03.031
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    References listed on IDEAS

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    Cited by:

    1. Priyadarshi Dash, 2017. "Predicting Financial Crises: A Study of Asian Economies," Global Business Review, International Management Institute, vol. 18(5), pages 1262-1277, October.
    2. Ari, Ali, 2012. "Early warning systems for currency crises: The Turkish case," Economic Systems, Elsevier, vol. 36(3), pages 391-410.
    3. Sáez, Antonio José & Prieto, Faustino & Sarabia, José María, 2012. "A two-tail version of the PPS distribution with application to current account balance data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(21), pages 5160-5171.

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