An almost-too-late warning mechanism for currency crises
AbstractWe propose exploiting the term structure of relative interest rates to obtain estimates of changes in the timing of a currency crisis as perceived by market participants. Our indicator can be used to evaluate the relative probability of a crisis occurring in one week as compared to a crisis happening after one week but in less than a month. We give empirical evidence that the indicator performs well for two important currency crises in Eastern Europe: the crisis in the Czech Republic in 1997 and the Russian crisis in 1998. Copyright (c) 2010 The Authors. Journal compilation (c) 2010 The European Bank for Reconstruction and Development.
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Bibliographic InfoArticle provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.
Volume (Year): 18 (2010)
Issue (Month): 1 (01)
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Other versions of this item:
- Jesus Crespo Cuaresma & Tomas Slacik, 2007. "An "Almost-Too-Late" Warning Mechanism For Currency Crises," Working Papers 2007-10, Faculty of Economics and Statistics, University of Innsbruck.
- Crespo Cuaresma, Jesýs & Slacik, Tomas, 2007. "An "almost-too-late" warning mechanism for currency crises," BOFIT Discussion Papers 4/2007, Bank of Finland, Institute for Economies in Transition.
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
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