Measuring potential vulnerabilities in emerging market economies
AbstractThis paper describes some experiments with the construction of relatively simple indices which summarise in a systematic and objective way information about emerging economies currently under pressure in financial markets and those vulnerable to such pressure in the future. A survey of the literature suggests financial crises are typically preceded by overvalued exchange rates, inadequate international reserves, recessions and excessive credit growth. These indicators and others, such as short-term external debt, which appear more important in recent crises are included in the summary indices of vulnerability. The vulnerability indices are shown to have modest predictive power for the pressure index but are far from conclusive in themselves.
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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 91.
Length: 46 pages
Date of creation: Oct 2000
Date of revision:
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