A Perspective on Predicting Currency Crises
AbstractCurrency crises are difficult to predict. It could be that we are choosing the wrong variables or using the wrong models or adopting measurement techniques not up to the task. We set up a Monte Carlo experiment designed to evaluate the measurement techniques. In our study, the methods are given the right fundamentals and the right models and are evaluated on how closely the estimated predictions match the objectively correct predictions. We find that all methods do reasonably well when fundamentals are explosive and all do badly when fundamentals are merely highly volatile.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 10/227.
Date of creation: 01 Oct 2010
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-30 (All new papers)
- NEP-CBA-2010-10-30 (Central Banking)
- NEP-FOR-2010-10-30 (Forecasting)
- NEP-IFN-2010-10-30 (International Finance)
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