Despite the extensive literature on prediction of banking crises by Early Warning Systems
(EWSs), their practical use by policy makers is limited, even in the international financial
institutions. This is a paradox since the changing nature of banking risks as more economies
liberalise and develop their financial systems, as well as ongoing innovation, makes the use
of EWS for informing policies aimed at preventing crises more necessary than ever. In this
context, we assess the logit and signal extraction EWS for banking crises on a …