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Speculative Attacks in the Asian Crisis

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  • Zhiwei Zhang
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    Abstract

    This paper takes the Asian crisis as an example to show that the Autoregressive Conditional Hazard (ACH) model is a powerful tool for studying the time series features of speculative attacks. The ACH model proposes a duration variable to capture the changes in the frequency of attacks, which might be an important factor influencing investors'' expectations. The empirical results show that the ACH model explains the crisis far better than the Probit model. The duration variable is highly significant while most fundamentals are not. The contagion effect is tested and accepted under the ACH specification.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/189.

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    Length: 20
    Date of creation: 01 Nov 2001
    Date of revision:
    Handle: RePEc:imf:imfwpa:01/189

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    References

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    1. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
    2. 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.).
    3. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2001. "Prospective Deficits and the Asian Currency Crisis," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1155-1197, December.
    4. Glick, Reuven & Rose, Andrew K., 1999. "Contagion and trade: Why are currency crises regional?," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 603-617, August.
    5. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 97/79, International Monetary Fund.
    6. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis? Part I: A Macroeconomic Overview," NBER Working Papers 6833, National Bureau of Economic Research, Inc.
    7. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
    8. Guillermo A. Calvo & Enrique G. Mendoza, 1999. "Regional Contagion and the Globalization of Securities Markets," NBER Working Papers 7153, National Bureau of Economic Research, Inc.
    9. Berg, Andrew & Pattillo, Catherine, 1999. "Predicting currency crises:: The indicators approach and an alternative," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 561-586, August.
    10. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
    11. Roberto Chang & Andres Velasco, 1998. "The Asian liquidity crisis," Working Paper 98-11, Federal Reserve Bank of Atlanta.
    12. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis? Part II: The Policy Debate," NBER Working Papers 6834, National Bureau of Economic Research, Inc.
    13. James D. Hamilton & Oscar Jorda, 2002. "A Model of the Federal Funds Rate Target," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1135-1167, October.
    14. Robert Flood & Nancy Marion, 1998. "Perspectives on the Recent Currency Crisis Literature," NBER Working Papers 6380, National Bureau of Economic Research, Inc.
    15. Rudger Dornbusch & Ilan Goldfajn & Rodrigo O. Valdés, 1995. "Currency Crises and Collapses," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 219-294.
    16. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    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.
    18. Paul R. Masson, 1998. "Contagion," IMF Working Papers 98/142, International Monetary Fund.
    19. Aaron Tornell, 1999. "Common Fundamentals in the Tequila and Asian Crises," NBER Working Papers 7139, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Grammig, Joachim & Kehrle, Kerstin, 2008. "A new marked point process model for the federal funds rate target: Methodology and forecast evaluation," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2370-2396, July.
    2. Lestano & Jan Jacobs & Gerard H. Kuper, 2004. "Indicators of financial crises do work! An early-warning system for six Asian countries," International Finance 0409004, EconWPA.
    3. Arias, Guillaume & Erlandsson, Ulf, 2004. "Regime switching as an alternative early warning system of currency crises - an application to South-East Asia," Working Papers 2004:11, Lund University, Department of Economics.
    4. Kim, Teakdong & Koo, Bonwoo & Park, Minsoo, 2013. "Role of financial regulation and innovation in the financial crisis," Journal of Financial Stability, Elsevier, vol. 9(4), pages 662-672.
    5. Jianping Shi & Yu Gao, 2010. "A study on KLR financial crisis early-warning model," Frontiers of Economics in China, Springer, vol. 5(2), pages 254-275, June.
    6. Steiner, Andreas, 2013. "How central banks prepare for financial crises – An empirical analysis of the effects of crises and globalisation on international reserves," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 208-234.
    7. Dieter Gerdesmeier & Hans-Eggert Reimers & Barbara Roffia, 2011. "Early Warning Indicators for Asset Price Booms," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 1-19, June.
    8. Ari, Ali, 2008. "An Early Warning Signals Approach for Currency Crises: The Turkish Case," MPRA Paper 25858, University Library of Munich, Germany, revised 2009.

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