Advanced Search
MyIDEAS: Login

Speculative currency attacks: role of inconsistent macroeconomic policies and real exchange rate overvaluation

Contents:

Author Info

Abstract

This paper provides a critical analysis of Kaminsky and Reinhart (1999) (KR), perhaps the most prominent empirical paper on causes of currency crises. After dealing with problems present in this paper, it proposes an aggregate leading indicator of crisis. The proposed indicator performs better than a composite index based on the best six individual indicators of KR, both in terms of accuracy and predictive capacity, and represents a unified version of the currency crises approach that emphasizes the role of inconsistent macroeconomic policies as an explanation of currency crises, and the approach that emphasizes the role of tradeoffs among policymakers decisions as the main cause of these crises. Variables included in the proposed leading indicator are: the deviation of the actual stock of internationall reserves from an estimated demand for international reserves; the real growth of domestic credit; the ratio of domestic credit to M2; and the behavior of both the real exchange rate and industrial production as a measure of overvaluation of the real exchange rate.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.economia.uahurtado.cl/pdf/publicaciones/a_pistelli_rae_vol22_2007.pdf
Download Restriction: no

Bibliographic Info

Article provided by Ilades-Georgetown University, Economics Department in its journal Revista de Analisis Economico.

Volume (Year): 22 (2007)
Issue (Month): 2 (December)
Pages: 3-27

as in new window
Handle: RePEc:ila:anaeco:v:22:y:2007:i:2:p:3-27

Contact details of provider:
Postal: Erasmo Escala 1835, 6500620 Santiago
Phone: (562) 692-0265
Fax: (562) 692-0303
Email:
Web page: http://www.economia.uahurtado.cl/
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Currency Crises; Current-Account Problems; Early Warning of Crises.;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
  2. Obstfeld, Maurice, 1996. "Models of Currency Crises with Self-fulfilling Features," CEPR Discussion Papers 1315, C.E.P.R. Discussion Papers.
  3. Kaminsky, Graciela & Lizondo, Saul & Reinhart, Carmen M., 1997. "Leading indicators of currency crises," Policy Research Working Paper Series 1852, The World Bank.
  4. Andrew Berg & Eduardo Borensztein & Catherine A. Pattillo, 2004. "Assessing Early Warning Systems: How Have They Worked in Practice?," IMF Working Papers 04/52, International Monetary Fund.
  5. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
  6. Catherine A. Pattillo & Andrew Berg, 1998. "Are Currency Crises Predictable? A Test," IMF Working Papers 98/154, International Monetary Fund.
  7. Blanco, Herminio & Garber, Peter M, 1986. "Recurrent Devaluation and Speculative Attacks on the Mexican Peso," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 148-66, February.
  8. Kaminsky, Graciela L. & Reinhart, Carmen M., 2000. "On crises, contagion, and confusion," Journal of International Economics, Elsevier, vol. 51(1), pages 145-168, June.
  9. 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.).
  10. Wildo González P. & Alfredo Pistelli M., 2007. "Estimación de la Probabilidad de Recesión en Estados Unidos," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 10(3), pages 129-136, December.
  11. Amartya Lahiri & Carlos A. Vegh, 2003. "Delaying the Inevitable: Interest Rate Defense and Balance of Payments Crises," Journal of Political Economy, University of Chicago Press, vol. 111(2), pages 404-424, April.
  12. Graciela L. Kaminsky, 2003. "Varieties of Currency Crises," NBER Working Papers 10193, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ayala, Alfonso, 2011. "Un modelo de predicción de crisis financieras en los mercados emergentes: 1970 – 2009
    [A Prediction Model of Financial Crises in Emerging Markets: 1970 - 2009]    ," MPRA Paper 42403, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ila:anaeco:v:22:y:2007:i:2:p:3-27

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcela Perticara).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.