Optimizing Policymakers' Loss Functions in Crisis Prediction: Before, Within or After?

Research, Preprint English OPEN
Sarlin, Peter; von Schweinitz, Gregor;
  • Publisher: Halle (Saale): Leibniz-Institut für Wirtschaftsforschung Halle (IWH)
  • Related identifiers: doi: 10.2866/48672
  • Subject: C53 | early-warning models, loss functions, threshold setting, predictive performance | C35 | early-warning models | threshold setting | predictive performance | G01 | loss functions
    • jel: jel:C53 | jel:G01 | jel:C35
      ddc: ddc:330

Early-warning models most commonly optimize signaling thresholds on crisis probabilities. The expost threshold optimization is based upon a loss function accounting for preferences between forecast errors, but comes with two crucial drawbacks: unstable thresholds in rec... View more
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