Research on Currency Crisis Early Warning Systems

This paper points out that traditional early warning procedures are oversimple and differences in average lead time of leading indicators are neglected. Aiming at those problems, a multi-time-scale early warning system is designed, in which the early warning procedure is divided into three levels, long-term, mid-term and short-term level, so that to meet different early warning demands in different situations. Accordingly, the leading indicators are divided into three levels too. The multi-scale early warning system is applied to the Philippine Currency crisis of 1997. Conclusions show that the system has better early warning capability.