The global financial crisis of 2007-2008 focused the attention of financial authorities on developing methods to forecast and avoid future financial crises of similar magnitude. We contribute to the literature on crisis prediction in several important ways. First, we develop an early warning system (EWS) that provides 7-12 quarters advance warning with high accuracy in out-of-sample testing. Second, the EWS applies region-wide to the leading economies in the European Union. Third, the methodology is transparent – utilizing only publicly available macro-level data and standard statistical classification methodology (multinomial logistic regression, discriminant analysis, and neural networks). Fourth, we employ two relatively novel methodological innovations in EWS modeling: ternary state classification to guarantee a minimum advance warning period, and a fitting and evaluation criterion (the total harmonic mean) that prioritizes avoiding classification errors for the relatively infrequent events of most interest. As a consequence, a policymaker who uses these methods will enjoy a high probability that future crises will be signaled well in advance and that warnings of crisis will not be false alarms.

中文翻译：

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欧盟的三国预警系统

2007-2008 年的全球金融危机将金融当局的注意力集中在开发方法来预测和避免未来类似规模的金融危机上。我们以几个重要的方式为有关危机预测的文献做出贡献。首先，我们开发了一个预警系统（EWS），可以在样本外测试中提供 7-12 个季度的高精度预警。其次，EWS 在区域范围内适用于欧盟的主要经济体。第三，该方法是透明的——仅使用公开可用的宏观数据和标准统计分类方法（多项逻辑回归、判别分析和神经网络）。第四，我们在 EWS 建模中采用了两种相对新颖的方法创新：三元状态分类以保证最短的预警期，以及一个拟合和评估标准（总谐波平均值），它优先考虑避免最感兴趣的相对不常见的事件的分类错误。因此，使用这些方法的决策者很有可能会提前发出未来危机的信号，并且危机警告不会是误报。