Year of Graduation
Warning Indicators Model Construction to Predict Booms/ Recessions of Tangible and Financial Assets Prices
In this work a modern approach to forecasting of a possible economic crisis is observed. It is based on the analysis of the present market situation and building of a cumulative, early warning index, that will obviously demonstrate presence of intensity on markets, and it is possible development into global crisis. Data of several developing countries (from the former soviet union). Methodology applied to this study is the so called ‘signalling approach’. It is used by economists to forecast asset price ‘booms’, that may have serious consequences on the world’s economy. The research paper analyzes the suitability of various indicators and their comparability with a real economic situation and relative actions. It also demonstrates, that global trends of liquidity are forward to unbalancing and financial instability is growing, so that are among the best performing indicators. These indicator’s display forecasts, that mark serious problems on existing markets. The forecasts, made in this study will provide useful information for policy makers interested in timely reaction to asset prices booms and growing financial instability. So, it will be possible to choose between type I and type II errors, that may occur in the process of forecasting. Furthermore, this study will provide complex investigation of both financial and house markets, and will obviously show, how and why the 2008 crisis developed.