Donga, LGERI develop pre-warning financial index

Pre-warning indices that monitor changing instabilities in the financial markets and microeconomics and at the same time provide pre-warning signals for currency crises have been domestically developed for the first time.

Dong-A Ilbo and LG Economic Research Institute announced Tuesday their co-development of pre-warning indices that provide checkpoints and prevention for market instabilities for 2 to 3 months into the future. The two will take turns in announcing the indices on a monthly basis.

Feeling that the currency crisis of 1997 emerged mainly from the lack of a pre-warning system, Dong-A Ilbo developed the indices to detect currency and financial crises beforehand and to prevent such hardship. There are four indices and they include monitoring indexes for treasury conditions, warning indexes for currency crisis, and monitoring indices for intrinsic values of companies and probability indices for bankruptcies.

The pre-warning indexes are regularly announced in foreign financial institutions, but this was the first time ever in Korea. The announcements of pre-warning financial indices indicate that the financial market is worsening. Considering what the indices indicate, we can¡¯t be too optimistic about the financial market, which recently restored stability.