ECB Working Paper Series

RESEARCH - This paper develops a new Early Warning System model for predicting financial crises, based on a multinomial logit model. It is shown that some EWS approaches can be subject to a 'post-crisis bias'. An optimal design of EWS models is suggested allowing policy-makers to make an optimal choice based on their degree of risk-aversion against unanticipated financial crises.

TOWARDS A NEW EARLY WARNING SYSTEM OF FINANCIAL CRISES

This paper develops a new Early Warning System (EWS) model for

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