Anticipating Balance of Payments Crises : The Role of Early Warning Systems

Recent years have seen an increase in the frequency of currency and balance of payments crises in developing countries. After the Mexican crisis in 1994, efforts were made to design an early warning system. These efforts have intensified since the 1997 Asian crisis. EWS apply a statistical method to predict the likelihood that a country will face a currency of balance of payments crisis. This IMF publication examines the concept of EWS, evaluating the models and looking at their implementation.