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How Homogenous are Currency Crises? A Panel Study Using Multiple-Response Models

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  • Tassos G. Anastasatos

    ()
    (Bank of Greece and Business School, University of Loughborough)

  • Ian R. Davidson

    (Business School, University of Loughborough)

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    Abstract

    This paper presents evidence that currency episodes display heterogeneity in terms of their evolution, their impact on the inflicted economy and their links with financial, political and macroeconomic fundamentals. Limited-dependent variable models for ordered and unordered outcomes along with their heteroskedastic and random effects extensions are applied to a large panel of data comprising 40 years of monthly observations on 23 developed countries. Heterogeneity, complemented by indications of self-fulfilling expectations and noise, suggest that time and region specific predictive approaches and policy responses are more useful than trying to base analysis and policy decisions on more general patterns. Results are established with formal specification tests.

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    File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper200652.pdf
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    Bibliographic Info

    Paper provided by Bank of Greece in its series Working Papers with number 52.

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    Length: 44 pages
    Date of creation: Dec 2006
    Date of revision:
    Handle: RePEc:bog:wpaper:52

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    Related research

    Keywords: Money demand; Currency crises; speculative pressure; exchange rate; devaluation; Limited-dependent variable models;

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    2. Mishkin, Frederic S, 1992. "Anatomy of a Financial Crisis," Journal of Evolutionary Economics, Springer, vol. 2(2), pages 115-30, August.
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    17. 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.
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    Cited by:
    1. Stephan Barisitz, 2008. "Banking Transformation (1989 - 2006) in Central and Eastern Europe - With Special Reference to Balkans," Working Papers 78, Bank of Greece.
    2. Roumen Avramov & Dragana Gnjatovic, 2008. "Stabilization Policies in Bulgaria and Yugoslavia During Communism's Terminal Years : 1980s Economic Visions in Retrospect," Working Papers 81, Bank of Greece.
    3. Peter Bernholz, 2008. "Government Bankruptcy of Balkan Nations and their Consequences for Money and Inflation before 1914: A Comparative Analysis," Working Papers 74, Bank of Greece.

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