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Politically generated uncertainty and currency crises: Theory, tests, and forecasts

  • Leblang, David
  • Satyanath, Shanker
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    While it is widely acknowledged that political factors contribute to currency crises there have been few efforts at using political variables to improve crisis forecasts. We discuss ways in which political factors can be incorporated into theoretical models of crises, and develop testable hypotheses relating variations in political variables to variations in the probability of a currency crisis. We show that the incorporation of political variables into diverse crisis models substantially improves their out-of-sample predictive performance.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0261-5606(08)00023-5
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    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 27 (2008)
    Issue (Month): 3 (April)
    Pages: 480-497

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    Handle: RePEc:eee:jimfin:v:27:y:2008:i:3:p:480-497
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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