Are the Central and Eastern European Transition Countries still vulnerable to a Financial Crisis? Results from a Multivariate Logit Analysis
AbstractThe aim of the paper is to analyse the determinants of financial crises in a sample of nine transition countries in Central and Eastern Europe with a modified logit model. The modification takes explicitly into account the rare event characteristic of a currency crisis. Our results suggest that it is possible to explain the occurrence of crises with only a small number of macroeconomic variables. The variables which contribute positively to the probability of a crisis are: i) the ratio of the current account deficit to GDP; ii) the ratio of the budget deficit to GDP; iii) the change in currency reserves; iv) the amount of real appreciation of the currency relative to a trend, and v) the change in exports. Short-term debt by banks, which played a key role in the history of the Asian crises, was not an important factor in the build up of the crisis potential in Central and Eastern Europe.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 141.
Date of creation: 04 Jun 2003
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currency crisis; logit-analysis; Central and Eastern Europe;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-06-16 (All new papers)
- NEP-EEC-2003-06-16 (European Economics)
- NEP-IFN-2003-07-21 (International Finance)
- NEP-TRA-2003-06-16 (Transition Economics)
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- Vesna Bucevska, 2011. "An analysis of financial crisis by an early warning system model: The case of the EU candidate countries," Business and Economic Horizons (BEH), Prague Development Center, vol. 4(1), pages 13-26, January.
- Markiewicz, Agnieszka, 2006. "How Central and Eastern European Countries Choose Exchange Rate Regimes," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2.
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