This paper investigates the performance of early warning systems for currency crises in real-time, using forecasts of indicators that are available at the moment predictions are to be made. We investigate two types of commonly used early warning systems for currency crises: the signal approach and the logit model. We apply each EWS to a panel of fifteen emerging economies, distinguishing an estimation period 1991Q1-2010Q4 and a prediction period 2011Q1-2017Q4. We find that using indicator forecasts in the predictions worsens the ability of early warning systems to signal crises compared to the most recently available information. Keywords Real time data • Early warning system • Currency crises • Signal approach • Logit model • Emerging economies JEL Classification F31 • E47 • G01 • C23 • E58 The opinions expressed here are those of the authors and do not necessarily represent Banco de Mexico's or its board of governors' opinions. The first version of this work was developed during the research internship program of the first author at the Banco de México in the summer of 2015. We thank Diego Cid and Stefano Lord for excellent research assistance;

We construct a continuous sovereign debt crisis index for four large Latin American countries for the period 1870-2012. Our sovereign debt crisis index is similar to the Exchange Market Pressure Index for currency crises, and the Money Market Pressure Index for banking crises. To obtain the optimal set of indicators and the optimal value of the threshold for dating crises we apply the Receiver Operating Characteristic (ROC) curve. We calculate our sovereign debt crisis index as a weighted average of three indicators, the debt to GDP ratio, the external interest rate spread and the exports to imports ratio. The continuous index allows a more advanced analysis of sovereign debt crises. We include two applications. In the first application we investigate the relationship between sovereign debt crises and the business cycle in Latin America. Our second application constructs a similar index for five European countries.

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This article analyzes sovereign debt defaults in four Latin American countries—Argentina, Brazil, Chile and Mexico—for the period 1870-2012. The impact of sovereign defaults on real GDP growth is generally short-lived, while the impact in terms of output losses is deep and lasts long. Defaults in the period 1972-2012 show a deep and long-lasting impact compared to defaults in earlier periods. Moreover, the length of the contraction that follows a default is associated with favourable international conditions in the run-up to a default, while the depth of the contraction is associated with an expansive domestic economy in the run-up to a default. The results fit with boom–bust theories and sudden stop models.