1. bookVolume 11 (2022): Edizione 2 (May 2022)
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Rivista
eISSN
2336-9205
Prima pubblicazione
11 Mar 2014
Frequenza di pubblicazione
3 volte all'anno
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Inglese
access type Accesso libero

Adaptive Early Warning Systems: An Axiomatic Approach

Pubblicato online: 30 Apr 2022
Volume & Edizione: Volume 11 (2022) - Edizione 2 (May 2022)
Pagine: 145 - 164
Ricevuto: 19 Oct 2020
Accettato: 01 Jun 2021
Dettagli della rivista
License
Formato
Rivista
eISSN
2336-9205
Prima pubblicazione
11 Mar 2014
Frequenza di pubblicazione
3 volte all'anno
Lingue
Inglese
Abstract

The U.S. Subprime Crisis and the subsequent Great Recession have highlighted a renewed interest in the proper design and implementation of Early Warning Systems (E.W.S.), in order to help deter the onset of subsequent extreme financial events, through the implementation of adequate crisis detection mechanisms. The present article describes the Adaptive Early Warning Systems (A.E.W.S.) axiomatic approach, as a natural operational extension to E.W.S. testing. This novel protocol upholds the operational dimension of implementing an efficient holistic crisis detection mechanism, a domain which has been hitherto overlooked by the E.W.S. literature. The paper first describes the major axiomatic principles sustaining the A.E.W.S. protocol, which seek to establish universal principles in support of the said protocol. Second, the article also describes a basic universal template for an A.E.W.S. surveillance platform, which duly describes how multiple testing procedures can be integrated into a single crisis detection framework, while targeting multiple segments of the financial markets (such as the conventional and non-conventional segments of the financial markets). Third, the paper also describes the major advantages and disadvantages associated with the implementation of this novel protocol. It is hoped that the effective implementation of the A.E.W.S. protocol as a novel operational framework in the global macroprudential toolkit might help deter the onset of future extreme financial events, by enabling a greater cohesiveness in E.W.S.-related central banking procedures, as well as promoting a greater international central banking cooperation prior to and during financial distress episodes.

Keywords

JEL Classification

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