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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. Omar Mahmoud, Toman & Trebesch, Christoph, 2010. "The economics of human trafficking and labour migration: Micro-evidence from Eastern Europe," Munich Reprints in Economics, University of Munich, Department of Economics 19321, University of Munich, Department of Economics.
    2. Omar Mahmoud, Toman, 2010. "Shocks, income diversification and welfare in developing and transition countries," Open Access Publications from Kiel Institute for the World Economy 59754, Kiel Institute for the World Economy (IfW).
    3. Sandro C. Andrade & Emanuel Kohlscheen, 2010. "Pessimistic Foreign Investors and Turmoil in Emerging Markets: the case of Brazil in 2002," Working Papers Series, Central Bank of Brazil, Research Department 211, Central Bank of Brazil, Research Department.
    4. 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.
    5. Toman Omar Mahmoud & Christoph Trebesch, 2009. "The Economic Drivers of Human Trafficking: Micro-Evidence from Five Eastern European Countries," Kiel Working Papers 1480, Kiel Institute for the World Economy.

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