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Currency crashes in emerging markets: An empirical treatment

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  • Frankel, Jeffrey A.
  • Rose, Andrew K.

Abstract

We use a panel of annual data for over one hundred developing countries from 1971 through 1992 to characterize currency crashes. We define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of the nominal depreciation. We examine the composition of the debt as well as its level, and a variety of other macroeconomic, external and foreign factors. Our factors are significantly related to crash incidence, especially output growth, the rate of change of domestic credit, and foreign interest rates. A low ratio of FDI to debt is consistently associated with a high likelihood of a crash.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 41 (1996)
Issue (Month): 3-4 (November)
Pages: 351-366

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Handle: RePEc:eee:inecon:v:41:y:1996:i:3-4:p:351-366

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Web page: http://www.elsevier.com/locate/inca/505552

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References

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  1. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  2. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
  3. Wei, S.J. & Frankel, J.A., 1992. "Yen Bloc or Dollar Bloc: Exchange Rate Policies of the East Asian Economies," Papers 92-08, University of Birmingham - International Financial Group.
  4. Fernandez-Arias, Eduardo, 1996. "The new wave of private capital inflows: Push or pull?," Journal of Development Economics, Elsevier, vol. 48(2), pages 389-418, March.
  5. Julio A. Santaella, 1995. "Four Decades of Fund Arrangements - Macroeconomic Stylized Facts Before the Adjustment Programs," IMF Working Papers 95/74, International Monetary Fund.
  6. Cole, Harold L & Kehoe, Timothy J, 2000. "Self-Fulfilling Debt Crises," Review of Economic Studies, Wiley Blackwell, vol. 67(1), pages 91-116, January.
  7. Michael P. Dooley & Eduardo Fernandez-Arias & Kenneth M. Kletzer, 1994. "Recent Private Capital Inflows to Developing Countries: Is the Debt Crisis History?," NBER Working Papers 4792, National Bureau of Economic Research, Inc.
  8. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  9. Connolly, Michael, 1986. "The speculative attack on the peso and the real exchange rate: Argentina, 1979-1981," Journal of International Money and Finance, Elsevier, vol. 5(1, Supple), pages S117-S130, March.
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  1. The 2008-09 Global Financial Crisis: Lessons for Country Vulnerability
    by jfrankel in Jeff Frankels Weblog on 2011-09-18 16:12:58
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