IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Early warning systems for currency crises: The Turkish case

  • Ari, Ali
Registered author(s):

Different severe financial crises episodes occurred in the Turkish economy in the last two decades. These crises led to severe economic and social consequences for Turkey in terms of increasing interest rates, large reserves losses, considerable currency depreciations, high output losses and high unemployment rates. This paper aims to illustrate the essential determinants of these crises by developing a multivariate logit model which estimates the predictive ability of sixteen economic and financial indicators in a sample that covers the period from January 1990 to December 2008. The empirical findings show that the Turkish crises are mainly due to excessive fiscal deficits, high money supply growths, sharp rises in short-term external debt, growing riskiness of the banking system (in particular currency and liquidity mismatches), and external adverse shocks.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0939362512000544
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Economic Systems.

Volume (Year): 36 (2012)
Issue (Month): 3 ()
Pages: 391-410

as
in new window

Handle: RePEc:eee:ecosys:v:36:y:2012:i:3:p:391-410
DOI: 10.1016/j.ecosys.2012.07.001
Contact details of provider: Postal:
Landshuter Str. 4, 93047 Regensburg

Phone: +49-(0)941-943 54 10
Fax: +49-(0)941-943 54 27
Web page: http://www.elsevier.com/locate/inca/621171
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Caramazza, Francesco & Ricci, Luca & Salgado, Ranil, 2004. "International financial contagion in currency crises," Journal of International Money and Finance, Elsevier, vol. 23(1), pages 51-70, February.
  2. Kumar, Mohan & Moorthy, Uma & Perraudin, William, 2003. "Predicting emerging market currency crashes," Journal of Empirical Finance, Elsevier, vol. 10(4), pages 427-454, September.
  3. Tuomas Komulainen & ) & Johanna Lukkarila, 2003. "What drives financial crises in emerging markets?," Macroeconomics 0304010, EconWPA.
  4. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
  5. Calvo, Guillermo A. & Vegh, Carlos A., 1999. "Inflation stabilization and bop crises in developing countries," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 24, pages 1531-1614 Elsevier.
  6. P.J.G. Vlaar, 1999. "Currency Crises Models for Emerging Markets," WO Research Memoranda (discontinued) 595, Netherlands Central Bank, Research Department.
  7. Fatih Ozatay, 2000. "The 1994 currency crisis in Turkey," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 3(4), pages 327-352.
  8. Agenor, Pierre-Richard & McDermott, C. John & Ucer, Murat, 1997. "Fiscal imbalances, capital inflows, and the real exchange rate: The case of Turkey," European Economic Review, Elsevier, vol. 41(3-5), pages 819-825, April.
  9. Irwin, Gregor & Vines, David, 2000. "Government Guarantees, Investment And Vulnerability To Financial Crises," CEPR Discussion Papers 2652, C.E.P.R. Discussion Papers.
  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. Aaron Tornell, 1999. "Common Fundamentals in the Tequila and Asian Crises," Harvard Institute of Economic Research Working Papers 1868, Harvard - Institute of Economic Research.
  12. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 2004. "Government guarantees and self-fulfilling speculative attacks," Journal of Economic Theory, Elsevier, vol. 119(1), pages 31-63, November.
  13. Obstfeld, Maurice, 1996. "Destabilizing Effects of Exchange-Rate Escape Clauses," Center for International and Development Economics Research (CIDER) Working Papers 233439, University of California-Berkeley, Department of Economics.
  14. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
  15. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "Paper Tigers? A Model of the Asian Crisis," NBER Working Papers 6783, National Bureau of Economic Research, Inc.
  16. Andrew Berg & Eduardo Borensztein & Catherine A Pattillo, 2004. "Assessing Early Warning Systems; How Have they Worked in Practice?," IMF Working Papers 04/52, International Monetary Fund.
  17. 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.
  18. Bertrand Candelon & Elena Ivona Dumitrescu & Christophe Hurlin, 2012. "How to Evaluate an Early Warning System? Towards a Unified Statistical Framework for Assessing Financial Crises Forecasting Methods," Post-Print hal-01385900, HAL.
  19. Komulainen, Tuomas & Lukkarila, Johanna, 2003. "What drives financial crises in emerging markets?," Emerging Markets Review, Elsevier, vol. 4(3), pages 248-272, September.
  20. Harold L. Cole & Timothy J. Kehoe, 1996. "A self-fulfilling model of Mexico's 1994-95 debt crisis," Staff Report 210, Federal Reserve Bank of Minneapolis.
  21. Graciela Laura Kaminsky, 1999. "Currency and Banking Crises; The Early Warnings of Distress," IMF Working Papers 99/178, International Monetary Fund.
  22. Ãzge ÃeÅmeci & A. Ãzlem Ãnder, 2008. "Determinants of Currency Crises in Emerging Markets: The Case of Turkey," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(5), pages 54-67, September.
  23. F. Gulcin Ozkan, 2005. "Currency and Financial Crises in Turkey 2000-2001: Bad Fundamentals or Bad Luck?," The World Economy, Wiley Blackwell, vol. 28(4), pages 541-572, 04.
  24. Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2000. "A simple model of monetary policy and currency crises," European Economic Review, Elsevier, vol. 44(4-6), pages 728-738, May.
  25. Blanco, Herminio & Garber, Peter M, 1986. "Recurrent Devaluation and Speculative Attacks on the Mexican Peso," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 148-66, February.
  26. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1995. "Speculative attacks on pegged exchange rates: an empirical exploration with special reference to the European Monetary System," Working Papers in Applied Economic Theory 95-04, Federal Reserve Bank of San Francisco.
  27. Roberto Chang & Andres Velasco, 1998. "Financial crises in emerging markets: a canonical model," FRB Atlanta Working Paper 98-10, Federal Reserve Bank of Atlanta.
  28. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
  29. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 97/79, International Monetary Fund.
  30. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
  31. Mete FERIDUN, 2008. "Currency Crises In Emerging Markets: The Case Of Post-Liberalization Turkey," The Developing Economies, Institute of Developing Economies, vol. 46(4), pages 386-427.
  32. Mariano Roberto S & Gultekin Bulent N & Ozmucur Suleyman & Shabbir Tayyeb & Alper C. Emre, 2004. "Prediction of Currency Crises: Case of Turkey," Review of Middle East Economics and Finance, De Gruyter, vol. 2(2), pages 1-21, August.
  33. Schnatz, Bernd, 1998. "Macroeconomic determinants of currency turbulences in emerging markets," Discussion Paper Series 1: Economic Studies 1998,03e, Deutsche Bundesbank, Research Centre.
  34. Jan P. A. M. Lestano, 2007. "Dating currency crises with ad hoc and extreme value-based thresholds: East Asia 1970-2002 [Dating currency crises]," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(4), pages 371-388.
  35. 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.
  36. Obstfeld, Maurice, 1996. "Models of currency crises with self-fulfilling features," European Economic Review, Elsevier, vol. 40(3-5), pages 1037-1047, April.
  37. Dooley, Michael P, 2000. "A Model of Crises in Emerging Markets," Economic Journal, Royal Economic Society, vol. 110(460), pages 256-72, January.
  38. Philippe Gilles, 2007. "Introduction - Vulnérabilité et crises financières : enseignements pour une architecture financière internationale," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 26, pages 5-12.
  39. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Assessing financial vulnerability, an early warning system for emerging markets: Introduction," MPRA Paper 13629, University Library of Munich, Germany.
  40. Abdul d Abiad, 2003. "Early Warning Systems; A Survey and a Regime-Switching Approach," IMF Working Papers 03/32, International Monetary Fund.
  41. Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. " Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 463-84, December.
  42. Hali J. Edison, 2000. "Do indicators of financial crises work? an evaluation of an early warning system," International Finance Discussion Papers 675, Board of Governors of the Federal Reserve System (U.S.).
  43. Rodrik, Dani, 1990. "Premature Liberalization, Incomplete Stabilization: The Ozal Decade in Turkey," CEPR Discussion Papers 402, C.E.P.R. Discussion Papers.
  44. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(4), pages 459-472, November.
  45. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
  46. Elif Cepni & Nezir Kose, 2006. "Assessing the Currency Crises in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 6(1), pages 37-64.
  47. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  48. Ranil M Salgado & Luca A Ricci & Francesco Caramazza, 2000. "Trade and Financial Contagion in Currency Crises," IMF Working Papers 00/55, International Monetary Fund.
  49. Korkut BORATAV, 2001. "2000-2001 Krizinde Sermaye Hareketleri," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 16(186), pages 7-17.
  50. Bussiere, Matthieu & Mulder, Christian, 2000. "Political Instability and Economic Vulnerability," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 5(4), pages 309-30, October.
  51. Michael Chui, 2002. "Leading indicators of balance-of-payments crises: a partial review," Bank of England working papers 171, Bank of England.
  52. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
  53. Cole, Harold L. & Kehoe, Timothy J., 1996. "A self-fulfilling model of Mexico's 1994-1995 debt crisis," Journal of International Economics, Elsevier, vol. 41(3-4), pages 309-330, November.
  54. Roberto Chang & Andres Velasco, 2001. "A Model of Financial Crises in Emerging Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 489-517.
  55. Martin Schneider & Aaron Tornell, 2000. "Balance SHeet Effects, Bailout Guarantees and Financial Crises," NBER Working Papers 8060, National Bureau of Economic Research, Inc.
  56. Fatih Ozatay & Guven Sak, 2003. "Banking Sector Fragility and Turkey’s 2000–01 Financial Crisis," Working Papers 0308, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  57. O. Cevdet Akcay & C. Emre Alper & Suleyman Ozmucur, 2001. "Budget Deficit, Inflation and Debt Sustainability: Evidence from Turkey(1970-2000)," Working Papers 2001/12, Bogazici University, Department of Economics.
  58. Jeanne, Olivier, 1997. "Are currency crises self-fulfilling?: A test," Journal of International Economics, Elsevier, vol. 43(3-4), pages 263-286, November.
  59. Blackburn, Keith & Sola, Martin, 1993. " Speculative Currency Attacks and Balance of Payments Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 7(2), pages 119-44, June.
  60. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1996. "Contagious Currency Crises," NBER Working Papers 5681, National Bureau of Economic Research, Inc.
  61. Irwin, Gregor & Vines, David, 1999. "A Krugman-Dooley-Sachs Third Generation Model of the Asian Financial Crisis," CEPR Discussion Papers 2149, C.E.P.R. Discussion Papers.
  62. Pierre-Richard Agénor & Jagdeep S. Bhandari & Robert P. Flood, 1992. "Speculative Attacks and Models of Balance of Payments Crises," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 357-394, June.
  63. Rafal Antczak, 2000. "Theoretical Aspects of Currency Crises," CASE Network Studies and Analyses 0211, CASE-Center for Social and Economic Research.
  64. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
  65. Andrew Berg & Catherine Pattillo, 1999. "Are Currency Crises Predictable? A Test," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 1.
  66. Guillermo A. Calvo, 2000. "Balance-of-Payments Crises in Emerging Markets: Large Capital Inflows and Sovereign Governments," NBER Chapters, in: Currency Crises, pages 71-97 National Bureau of Economic Research, Inc.
  67. Christian B. Mulder & Matthieu Bussière, 1999. "External Vulnerability in Emerging Market Economies; How High Liquidity Can Offset Weak Fundamentals and the Effects of Contagion," IMF Working Papers 99/88, International Monetary Fund.
  68. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:ecosys:v:36:y:2012:i:3:p:391-410. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.