Author
Head of Educational Office in Industrial and Mining Bank
Abstract
Due to negative effects of financial crises on the real sectors of the economy, and the consequent recessionary impacts of them, the idea of forecasting financial crises via an early warning system has become a subject of interest to researchers.
Financial crises of 1997 in South East Aisa, and the fear of similar crises in the process of globalization has brought the subject to the attention of economists to a greater extent.
This paper introduces an early warning system for detection and forecasting of financial crisis as an impirical diagnostic tool of macroeconomic policy in Iran. The system is developed with reference to literature review in other countries, and on the basis of “Signal Extraction” and “Financial Crises Probability Forecasting Methods”. In a simulation test our system was effective in detecting the crisis of 1993 two years ahead. This system may be further supplemented by using alternative econometric methods for future forecastings.
Keywords
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