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Politically generated uncertainty and currency crises: Theory, tests, and forecasts

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  • Leblang, David
  • Satyanath, Shanker
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    Abstract

    While it is widely acknowledged that political factors contribute to currency crises there have been few efforts at using political variables to improve crisis forecasts. We discuss ways in which political factors can be incorporated into theoretical models of crises, and develop testable hypotheses relating variations in political variables to variations in the probability of a currency crisis. We show that the incorporation of political variables into diverse crisis models substantially improves their out-of-sample predictive performance.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 27 (2008)
    Issue (Month): 3 (April)
    Pages: 480-497

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    Handle: RePEc:eee:jimfin:v:27:y:2008:i:3:p:480-497

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    Web page: http://www.elsevier.com/locate/inca/30443

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    Cited by:
    1. Zeynep KARACOR & Korhan GOKMENOGLU, 2012. "Predictability Of Financial Crises: Testing K.R.L. Model In The Case Of Turkey," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 5-16, June.
    2. Andrade, Sandro C. & Kohlscheen, Emanuel, 2010. "Pessimistic Foreign Investors and Turmoil in Emerging Markets : The Case of Brazil in 2002," The Warwick Economics Research Paper Series (TWERPS) 926, University of Warwick, Department of Economics.
    3. Omar Mahmoud, Toman & Trebesch, Christoph, 2010. "The economics of human trafficking and labour migration: Micro-evidence from Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 173-188, June.

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