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Currency crashes in emerging markets: An empirical treatment

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  • Frankel, Jeffrey A.
  • Rose, Andrew K.

Abstract

We use a panel of annual data for over one hundred developing countries from 1971 through 1992 to characterize currency crashes. We define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of the nominal depreciation. We examine the composition of the debt as well as its level, and a variety of other macroeconomic, external and foreign factors. Our factors are significantly related to crash incidence, especially output growth, the rate of change of domestic credit, and foreign interest rates. A low ratio of FDI to debt is consistently associated with a high likelihood of a crash.
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  • 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.
    • Handle: RePEc:eee:inecon:v:41:y:1996:i:3-4:p:351-366
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