Leading Indicators of Currency and Banking Crises: Croatia and The World An Empirical Test

The key part of this work is an empirical test of the effectiveness of the signaling method in predicting “twin” crises in Croatia. A set of signal indicators obtained by ex-post analysis of banking and currency disturbances in Croatia in 1998 and 1999 surpassed all expectations regarding numerous difficulties in taking over the original “signal” approach, and it can be considered as a fundemental for future research efforts. The ultimative goal of this exercise is to build an effective early warning system for crisis in Croatia.