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Forecasting Financial Crises and Contagion in Asia using Dynamic Factor Analysis

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  • Andrea Cipollini

    ()

  • George Kapetanios

    ()

Abstract

In this paper we use principal components analysis to obtain vulnerability indicators able to predict financial turmoil. Probit modelling through principal components and also stochastic simulation of a Dynamic Factor model are used to produce the corresponding probability forecasts regarding the currency crisis events a®ecting a number of East Asian countries during the 1997-1998 period. The principal components model improves upon a number of competing models, in terms of out-of-sample forecasting performance.

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Bibliographic Info

Paper provided by University of Modena and Reggio E., Dept. of Economics in its series Center for Economic Research (RECent) with number 014.

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Length: pages 21
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:mod:recent:014

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Web page: http://www.recent.unimore.it/
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Keywords: Financial Contagion; Dynamic Factor Model;

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Citations

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Cited by:
  1. Kuper, Gerard H. & Jacobs, Jan P.A.M. & Boonman, Tjeerd M., 2012. "The Global Financial Crisis and currency crises in Latin America," Research Report 12005-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  2. Rodrigo César de Castro Miranda & Benjamin Miranda Tabak & Mauricio Medeiros Junior, 2012. "Contagion in CDS, Banking and Equity Markets," Working Papers Series 293, Central Bank of Brazil, Research Department.
  3. Tjeerd M. Boonman & Jan P. A. M. Jacobs & Gerard H. Kuper, 2011. "Why didn't the Global Financial Crisis hit Latin America?," CIRANO Working Papers 2011s-63, CIRANO.
  4. Briceño Avalos, Hernán Ricardo, 2003. "Tipos de Cambio Cuasi-fijo y Posibilidad de Crisis Financieras: Solarizar o Dolarizar la Economía Peruana?
    [Fixed Exchange Rates and Possibilities of Financial Crisis: Solarizar or Dollarization o
    ," MPRA Paper 42029, University Library of Munich, Germany.
  5. Corder, Matthew & Weale, Martin, 2011. "Banking crises and recessions: what can leading indicators tell us?," Discussion Papers 33, Monetary Policy Committee Unit, Bank of England.

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