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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. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
    2. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1999. "Prospective deficits and the asian currency crisis," Policy Research Working Paper Series 2174, The World Bank.
    3. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    4. Aaron Tornell, 1999. "Common Fundamentals in the Tequila and Asian Crises," Harvard Institute of Economic Research Working Papers 1868, Harvard - Institute of Economic Research.
    5. 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.
    6. Nancy P. Marion & Robert P. Flood, 1998. "Perspectiveson the Recent Currency Crisis Literature," IMF Working Papers 98/130, International Monetary Fund.
    7. Oscar Jorda & James D. Hamilton, 2003. "A model for the federal funds rate target," Working Papers 997, University of California, Davis, Department of Economics.
    8. Calvo, Guillermo A. & Mendoza, Enrique G., 2000. "Rational contagion and the globalization of securities markets," Journal of International Economics, Elsevier, vol. 51(1), pages 79-113, June.
    9. Roberto Chang & Andres Velasco, 1998. "The Asian liquidity crisis," Working Paper 98-11, Federal Reserve Bank of Atlanta.
    10. 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.
    11. 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.
    12. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    13. 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.
    14. 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.
    15. 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.
    16. 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.
    17. Paul R. Masson, 1998. "Contagion," IMF Working Papers 98/142, International Monetary Fund.
    18. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
    19. 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.
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    Cited by:
    1. 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.
    2. 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.
    3. Ari, Ali, 2008. "An Early Warning Signals Approach for Currency Crises: The Turkish Case," MPRA Paper 25858, University Library of Munich, Germany, revised 2009.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.

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