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Structural Vulnerabilities and Currency Crises

Author

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  • Swart R. Ghosh
  • Mr. Atish R. Ghosh

Abstract

This paper examines the role of structural factors—governance and rule of law, corporate sector governance (creditor rights and shareholder rights), corporate financing structure—as well as macroeconomic variables in currency crises. Using a technique known as a binary recursive tree allows for interactions between the various explanatory variables. It is found that structural vulnerabilities play an important role in the occurrence of “deep” currency crises (those with a real GDP growth decline of at least 3 percentage points) and that there are complex interactions between these structural vulnerabilities and macroeconomic imbalances.

Suggested Citation

  • Swart R. Ghosh & Mr. Atish R. Ghosh, 2002. "Structural Vulnerabilities and Currency Crises," IMF Working Papers 2002/009, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/009
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    Keywords

    WP; currency crisis; crisis country; debt-equity ratio; current account deficit; short-term debt; Currency crises; structural indicators; corporate governance; binary recursive trees; balance of payments crisis; crisis definition; cash flow; creditor right; crisis case; BOP crisis; countries in the sense; governance index; probability of a crisis; country surveillance work; Current account deficits; Current account balance; Public sector; East Asia;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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