IDEAS home Printed from https://ideas.repec.org/a/kap/openec/v11y2000i3p247-259.html
   My bibliography  Save this article

Forecasting Financial Crises in Emerging Market Economies

Author

Listed:
  • Derrick Reagle
  • Dominick Salvatore

Abstract

This article identifies six fundamental indicators that might predict a financial crisis similar to the one that affected the emerging markets of Southeast Asia. Our empirical analysis shows that the 1997 Asian crisis could have been predicted. Probit estimation reveals that a small number of common indicators can forecast a financial crisis well. The estimation gives estimates that are robust to either cross-section or panel data. We suggest an aggregate indicator that combines all the individual indicators and calculates the optimal thresholds for the indicators. This aggregate indicator has similar predictive properties and reduces the calculations to determine the probability of crisis. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Derrick Reagle & Dominick Salvatore, 2000. "Forecasting Financial Crises in Emerging Market Economies," Open Economies Review, Springer, vol. 11(3), pages 247-259, July.
  • Handle: RePEc:kap:openec:v:11:y:2000:i:3:p:247-259
    DOI: 10.1023/A:1008374807370
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1023/A:1008374807370
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
    2. Graciela L. Kaminsky, 1998. "Currency and banking crises: the early warnings of distress," International Finance Discussion Papers 629, Board of Governors of the Federal Reserve System (U.S.).
    3. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    4. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
    5. 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.
    6. Morris Goldstein & Graciela Kaminsky & Carmen Reinhart, 2017. "Methodology and Empirical Results," World Scientific Book Chapters,in: TRADE CURRENCIES AND FINANCE, chapter 11, pages 397-436 World Scientific Publishing Co. Pte. Ltd..
    7. Salvatore, Dominick, 1999. "Could the Financial Crisis in East Asia Have Been Predicted?," Journal of Policy Modeling, Elsevier, vol. 21(3), pages 341-347, May.
    8. Boyes, William J. & Hoffman, Dennis L. & Low, Stuart A., 1989. "An econometric analysis of the bank credit scoring problem," Journal of Econometrics, Elsevier, vol. 40(1), pages 3-14, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Burcu Dikmen & Güray Küçükkocaoğlu, 2010. "The detection of earnings manipulation: the three-phase cutting plane algorithm using mathematical programming," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(5), pages 442-466.
    2. Tullio Gregori, 2009. "Currency crisis duration and interest defence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(3), pages 256-267.
    3. Cornell, Christopher M., 2003. "Target zones, reserve crises, and inverted S-curves," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 13(4), pages 313-323, October.
    4. Guglielmo Maria Caporale & Antoaneta Serguieva & Hao Wu, 2008. "Financial Contagion: Evolutionary Optimisation of a Multinational Agent-Based Model," CESifo Working Paper Series 2444, CESifo Group Munich.
    5. I.Igal Magendzo, 2002. "Are Devaluations Really Contractionary?," Working Papers Central Bank of Chile 182, Central Bank of Chile.
    6. David M. Kemme & Saktinil Roy, 2012. "Did the Recent Housing Boom Signal the Global Financial Crisis?," Southern Economic Journal, Southern Economic Association, vol. 78(3), pages 999-1018, January.
    7. Arias, Guillaume & Erlandsson, Ulf, 2004. "Regime switching as an alternative early warning system of currency crises - an application to South-East Asia," Working Papers 2004:11, Lund University, Department of Economics.
    8. Mendoza, Ronald U., 2010. "Was the Asian crisis a wake-up call?: Foreign reserves as self-protection," Journal of Asian Economics, Elsevier, vol. 21(1), pages 1-19, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:11:y:2000:i:3:p:247-259. 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: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.