This study analyzes and provides empirical tests of early warning indicators of banking and currency crises in emerging economies. The aim is to identify key empirical regularities in the run-up to banking and currency crises that would enable officials and private market participants to recognize vulnerability to financial crises at an earlier stage. This, in turn, should make it easier to motivate the corrective policy actions that would prevent such crises from actually taking place. Interest in identifying early warning indicators of financial crises has soared of late, stoked primarily by two factors: the high cost to countries in the throes of crisis and an increasing awareness of the. | INSTITUTE FOR INTERNATIONAL ECONOMICS ASSESSING FINANCIAL VULNERABILITY An Early Warning System for Emerging Markets I w Morris Goldstein Graciela Kaminsky and Carmen Reinhart Copyrighted Material Morris Goldstein Dennis Weatherstone Senior Fellow has held several senior staff positions at the International Monetary Fund 1970-94 including deputy director of its research department 1987-94 . He has written extensively on international economic policy and on international capital markets. He is author of The Asian Financial Crisis Causes Cures and Systemic Implications 1998 The Case for an International Banking Standard 1997 The Exchange Rate System and the IMF A Modest Agenda 1995 coeditor of Private Capital Flours to Emerging Markets after the Mexican Crisis 1996 7 and project director of Safeguarding Prosperity in a Global Financial System The Future International Financial Architecture 1999 for the Council on Foreign Relations Independent Task Force on International Financial Architecture. Gradela Kaminsky visiting fellow is a professor of economics and international relations at George Washington University. She was assistant professor of economics at the University of California San Diego 1985-92 and a staff economist at the Board of Governors of the Federal Reserve System 1992-98 before joining George Washington University. She has been a consultant and visiting scholar at the International Monetary Fund and the World Bank and has published extensively on issues in open economy macroeconomics. In the last few years her areas of research have been on financial crises contagion and herding behavior. Carmen Reinhart visiting fellow is a professor at the University of Maryland ỉn the School of Public Affairs and the Department of Economics. She is a research associate at the National Bureau of Economic Research. She was vice president at the investment bank Bear Steams for several years before joining the research department at the International Monetary Fund in .
