Safety from Currency Crashes
AbstractAs part of a proposed two-stage early warning system, we estimate "safety zones" for fundamentals under which currency crashes are unlikely to occur. We depart from traditional regression-based early warning systems and instead estimate the set of fundamentals for which currency crises never occurred and label this environment "safe or near-safe." For a sample of emerging markets from 1985 through 1998, we are able to classify 47 percent of the observed tranquil environments as safe or near-safe on a 12-month horizon, based on criteria in which external debt and reserves feature heavily. Nonparametric tests indicate that environments we identified as safe or near-safe bear less than a 1 percent risk of a currency crash. The results also pass a number of out-of-sample tests. Copyright 2000, International Monetary Fund
Download InfoIf 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Palgrave Macmillan in its journal IMF Staff Papers.
Volume (Year): 47 (2000)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.palgrave-journals.com/
Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
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.:
- Christian B. Mulder & Matthieu BussiÃ¨re, 1999. "External Vulnerability in Emerging Market Economies," IMF Working Papers 99/88, International Monetary Fund.
- Kaminsky, Graciela & Lizondo, Saul & Reinhart, Carmen M., 1997.
"Leading indicators of currency crises,"
Policy Research Working Paper Series
1852, The World Bank.
- Jeffrey A. Frankel & Andrew K. Rose, 1996.
"Currency crashes in emerging markets: an empirical treatment,"
International Finance Discussion Papers
534, Board of Governors of the Federal Reserve System (U.S.).
- 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.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992.
"A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades,"
Journal of Political Economy,
University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
- Flood, Robert & Marion, Nancy, 1999.
"Perspectives on the Recent Currency Crisis Literature,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 4(1), pages 1-26, January.
- Robert Flood & Nancy Marion, 1998. "Perspectives on the Recent Currency Crisis Literature," NBER Working Papers 6380, National Bureau of Economic Research, Inc.
- Nancy P. Marion & Robert P. Flood, 1998. "Perspectiveson the Recent Currency Crisis Literature," IMF Working Papers 98/130, International Monetary Fund.
- Guillermo A. Calvo & Enrique G. Mendoza, 1996.
"Mexico's balance-of-payments crisis: a chronicle of death foretold,"
International Finance Discussion Papers
545, Board of Governors of the Federal Reserve System (U.S.).
- Calvo, Guillermo A. & Mendoza, Enrique G., 1996. "Mexico's balance-of-payments crisis: a chronicle of a death foretold," Journal of International Economics, Elsevier, vol. 41(3-4), pages 235-264, November.
- Cole, Harold L. & Kehoe, Timothy J., 1996. "A self-fulfilling model of Mexico's 1994-1995 debt crisis," Journal of International Economics, Elsevier, vol. 41(3-4), pages 309-330, November.
- Van Rijckeghem, Caroline & Weder di Mauro, Beatrice, 2004. "The Politics Of Debt Crises," CEPR Discussion Papers 4683, C.E.P.R. Discussion Papers.
- Theo S. Eicher & Charis Christofides & Chris Papageorgiou, 2012. "Did Established Early Warning Signals Predict the 2008 Crises?," Working Papers UWEC-2012-05, University of Washington, Department of Economics.
- Yucel, Eray, 2011. "A Review and Bibliography of Early Warning Models," MPRA Paper 32893, University Library of Munich, Germany.
- Gagnon, Joseph E., 2009.
"Currency crashes and bond yields in industrial countries,"
Journal of International Money and Finance,
Elsevier, vol. 28(1), pages 161-181, February.
- Joseph E. Gagnon, 2005. "Currency crashes and bond yields in industrial countries," International Finance Discussion Papers 837, Board of Governors of the Federal Reserve System (U.S.).
- Magazzino, Cosimo & Forte, Francesco, 2010. "Optimal size of government and economic growth in EU-27," MPRA Paper 26669, University Library of Munich, Germany.
- Andrew Berg & Rebecca N. Coke, 2004. "Autocorrelation-Corrected Standard Errors in Panel Probits," IMF Working Papers 04/39, International Monetary Fund.
- Frankel, Jeffrey & Saravelos, George, 2011.
"Can Leading Indicators Assess Country Vulnerability? Evidence from the 2008-09 Global Financial Crisis,"
Working Paper Series
rwp11-024, Harvard University, John F. Kennedy School of Government.
- Frankel, Jeffrey & Saravelos, George, 2012. "Can leading indicators assess country vulnerability? Evidence from the 2008–09 global financial crisis," Journal of International Economics, Elsevier, vol. 87(2), pages 216-231.
- Saravelo, George & Frankel, Jeffrey A., 2011. "Can Leading Indicators Assess Country Vulnerability? Evidence from the 2008-09 Global Financial Crisis," Scholarly Articles 5027952, Harvard Kennedy School of Government.
- Richard Hemming & Axel Schimmelpfennig & Michael Kell, 2003. "Fiscal Vulnerability and Financial Crises in Emerging Market Economies," IMF Occasional Papers 218, International Monetary Fund.
- Caroline Rijckeghem & Beatrice Weder, 2009. "Political institutions and debt crises," Public Choice, Springer, vol. 138(3), pages 387-408, March.
- Jeffrey A. Frankel & George Saravelos, 2010. "Are Leading Indicators of Financial Crises Useful for Assessing Country Vulnerability? Evidence from the 2008-09 Global Crisis," NBER Working Papers 16047, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elizabeth Gale).
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.