Predicting Financial Crises and Signal Indicators in G7 Countries

Abstract

Abstract This study aims to detect financial crises and their signal indicators in G7 countries from 1990 to 2016. For this purpose, fourteen leading economic indicators supported by the economic literature were examined for signaling and the 24-month crisis window before the beginning of a crisis. Among them, successful crisis estimators were determined by the noise signal ratio. The identified crisis estimators provide essential information about the dynamics of economies and the channels of the crisis affecting them. Our findings may help policymakers determine adverse policies against crisis, avoid significant losses, and stabilize the world economy and national economies.