The early warnings of balance-of-payments problems: Kaminsky and Reinhart revisited
AbstractThis paper builds upon the model of Kaminsky and Reinhart (1999) and extends it to triplecrises. It applies a new visualisation approach combining elements of an event study analysis and a fan chart technique. This approach illustrates the deviation of fundamentals in the runup to balance-of-payments problems. The results suggest that both systemic banking crises and deteriorating government finances are highly significant leading indicators. Taking these indicators into account helps build a new early warning system for currency crises. The results are highly significant and robust. The out-of-sample forecasts demonstrate the strong predictive power of the model. --
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Bibliographic InfoPaper provided by Frankfurt School of Finance and Management in its series Frankfurt School - Working Paper Series with number 205.
Date of creation: 2013
Date of revision:
currency crisis; financial sector vulnerability; early warning system;
Find related papers by JEL classification:
- F30 - International Economics - - International Finance - - - General
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-16 (All new papers)
- NEP-CBA-2013-11-16 (Central Banking)
- NEP-FOR-2013-11-16 (Forecasting)
- NEP-MON-2013-11-16 (Monetary Economics)
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