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Banking crises caused such great chaos to economies in the past that economists always tried to make an early warning system which could signal crises in advance. This paper attempted to check the predictability of asset prices as an early warning indicator for banking crises. Signal Extraction Approach was used to check the predictive power and noise signal of the variable. A time span of 1980 to 2019 was taken to load the data values and three threshold limits were selected to analyse the results. Three threshold limits were decided to check the predictive ability of the indicator. It was found that the indicator performed well on the 0.5 threshold limit.
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