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Brazilian Real Crisis Revisited: A Linear Probability Model to Identify Leading Indicators

  • Feridun, M.
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    This article aims at identifying the indicators of the Brazilian real crisis through building a probit model incorporating 20 monthly macroeconomic, political, and financial sector indicators from 1980:1 – 1999:1. Results indicate that the significant variables are inflation (1-month lag), real exchange rate (1-month lag), import growth (1-month lag), US interest rates (2-month lag), public debt/GDP (2-month lag), and current account/GDP (3-month lag). Evidence further indicates that the signs of the variables are in line with our expectations, with the exception of US interest rates.

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    File URL: http://www.usc.es/economet/reviews/ijaeqs114.pdf
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    Article provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies .

    Volume (Year): 1 (2004)
    Issue (Month): 1 ()
    Pages: 81-96

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    Handle: RePEc:eaa:ijaeqs:v:1:y2004:i:1_4
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    1. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 97/79, International Monetary Fund.
    2. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
    3. Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency crashes in emerging markets: an empirical treatment," International Finance Discussion Papers 534, Board of Governors of the Federal Reserve System (U.S.).
    4. Flood, Robert P. & Garber, Peter M. & Kramer, Charles, 1996. "Collapsing exchange rate regimes: Another linear example," Journal of International Economics, Elsevier, vol. 41(3-4), pages 223-234, November.
    5. Michael P. Dooley, 1997. "A Model of Crises in Emerging Markets," NBER Working Papers 6300, National Bureau of Economic Research, Inc.
    6. Berg, Andrew & Pattillo, Catherine, 1999. "Predicting currency crises:: The indicators approach and an alternative," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 561-586, August.
    7. Ozkan, F Gulcin & Sutherland, Alan, 1995. "Policy Measures to Avoid a Currency Crisis," Economic Journal, Royal Economic Society, vol. 105(429), pages 510-19, March.
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