On policymakers’ loss functions and the evaluation of early warning systems: Comment

C-Tier
Journal: Economics Letters
Year: 2014
Volume: 124
Issue: 3
Pages: 338-340

Authors (2)

Alessi, Lucia (European Commission) Detken, Carsten (not in RePEc)

Score contribution per author:

0.503 = (α=2.01 / 2 authors) × 0.5x C-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Sarlin (2013) suggests that if a loss function approach is chosen to derive the optimal threshold for financial crisis early warning indicators, the loss function specification should explicitly take into account the unconditional sample crisis probability. In this comment we argue that this approach is not robust to small perturbations of the preference parameter and is not easy to use for policy purposes. We suggest therefore to continue using a simpler loss function specification.

Technical Details

RePEc Handle
repec:eee:ecolet:v:124:y:2014:i:3:p:338-340
Journal Field
General
Author Count
2
Added to Database
2026-01-24