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A cautious note on the use of panel models to predict financial crises

  • van den Berg, Jeroen
  • Candelon, Bertrand
  • Urbain, Jean-Pierre

Panel data framework has often been used to build Early Warning Systems for financial crises. This paper questions the implicit assumption that crises are homogenously caused by identical factors. It suggests a preliminary step aiming at forming optimal country clusters.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4SX3NRW-2/2/22d752ba41a25d496724924d0ff35323
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 101 (2008)
Issue (Month): 1 (October)
Pages: 80-83

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Handle: RePEc:eee:ecolet:v:101:y:2008:i:1:p:80-83
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Bussiere, Matthieu & Fratzscher, Marcel, 2006. "Towards a new early warning system of financial crises," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 953-973, October.
  2. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 97/79, International Monetary Fund.
  3. Evrensel, Ayse Y. & Kutan, Ali M., 2006. "Creditor moral hazard in stock markets: Empirical evidence from Indonesia and Korea," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 640-654, June.
  4. W. R. M. Perraudin & Manmohan S. Kumar & Uma Moorthy, 2002. "Predicting Emerging Market Currency Crashes," IMF Working Papers 02/7, International Monetary Fund.
  5. Jeffrey Sachs & Aaron Tornell & Andres Velasco, 1996. "Financial Crises in Emerging Markets: The Lessons from 1995," Harvard Institute of Economic Research Working Papers 1759, Harvard - Institute of Economic Research.
  6. Miguel A. Kiguel & Nissan Liviatan, 1995. "Stopping Three Big Inflations: Argentina, Brazil, and Peru," NBER Chapters, in: Reform, Recovery, and Growth: Latin America and the Middle East, pages 369-414 National Bureau of Economic Research, Inc.
  7. Inoue, Atsushi & Kilian, Lutz, 2006. "On the selection of forecasting models," Journal of Econometrics, Elsevier, vol. 130(2), pages 273-306, February.
  8. 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.
  9. George Kapetanios, 2003. "Determining the Poolability of Individual Series in Panel Datasets," Working Papers 499, Queen Mary University of London, School of Economics and Finance.
  10. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
  11. Anja Shortland, 2004. "The Role of Politics and Institutions in LDC Currency Devaluations," Discussion Papers in Economics 04/30, Department of Economics, University of Leicester.
  12. Andrew Berg & Rebecca N. Coke, 2004. "Autocorrelation-Corrected Standard Errors in Panel Probits; An Application to Currency Crisis Prediction," IMF Working Papers 04/39, International Monetary Fund.
  13. Lestano & Jacobs, Jan & Kuper, Gerard H., 2003. "Indicators of financial crises do work! : an early-warning system for six Asian countries," CCSO Working Papers 200313, University of Groningen, CCSO Centre for Economic Research.
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