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Indicators of financial crises do work! An early-warning system for six Asian countries

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Author Info
Lestano (Department of Economics University of Groningen)
Jan Jacobs (Department of Economics University of Groningen)
Gerard H. Kuper (Department of Economics University of Groningen)

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Abstract

Indicators of financial crisis generally do not have a good track record. This paper presents an early warning system for six countries in Asia, in which indicators do work.We distinguish three types of financial crises, currency crises, banking crises and debt crises, and extract four groups of indicators from the literature—external, financial, domestic (real and public), and global indicators—that are likely to affect the probability of financial crises. The significance of the indicator groups is tested in a multivariate logit model on a panel of six Asian countries for the period 1970:01-2001:12. An additional feature is that we examine four different currency crisis dating definitions. A within-sample signal extraction experiment reveals that some currency crises dating schemes outperform others.

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Paper provided by EconWPA in its series International Finance with number 0409004.

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Date of creation: 08 Sep 2004
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Handle: RePEc:wpa:wuwpif:0409004

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Related research
Keywords: financial crises; currency crises; banking crises; debt crises; early warning system; panel data; multivariate logit; factor analysis;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models
F31 - International Economics - - International Finance - - - Foreign Exchange
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jan P.A.M. Jacobs & Gerard H. Kuper & Lestano, 2004. "Currency crises in Asia: A multivariate logit approach," International Finance 0409005, EconWPA. [Downloadable!]
    Other versions:
  2. Matthew S. Yiu & Alex Ho & Lu Jin, 2009. "Econometric Approach to Early Warnings of Vulnerability in the Banking System and Currency Markets for Hong Kong and Other EMEAP Economies," Working Papers 0908, Hong Kong Monetary Authority. [Downloadable!]
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