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May 25, 2026
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Incorporating financial development indicators into early warning systems

Journal of Economic Asymmetries. 2023. Vol. 27. Article e00284.
Ponomarenko A. A., Татаринцев С. А.

We set up an early warning system for financial crises based on the Random Forrest approach. We use a novel set of predictors that comprises financial development indicators in addition to conventional imbalances measures. The evaluation of the model is conducted using a three-step procedure (i.e. training, validation and testing sub-samples). The results indicate that combining financial imbalances and financial development indicators helps to improve the out-of-sample accuracy of the early warning system.

Language: English
DOI
Text on another site
Keywords: financial developmentcredit gap financial crisisrandom forestEarly warning indicators
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