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Leading Indicators of Currency Crises: Are They the Same in Different Exchange Rate Regimes?

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  • Yanping Zhao
  • Jakob Haan
  • Bert Scholtens

    ()

  • Haizhen Yang

Abstract

We investigate whether leading indicators of currency crises differ across exchange rate regimes using data for 88 countries in the period 1981–2010. Our estimates suggest that in fixed exchange rate regimes external indicators, such as deviations of the real exchange rate from trend and the growth of international reserves, have the strongest predictive power. In contrast, in floating exchange rate regimes monetary policy and credibility indicators, such as domestic credit growth and inflation, are the best leading indicators of currency crises. Both credibility and external economic indicators have predictive power in intermediate exchange rate regimes. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Yanping Zhao & Jakob Haan & Bert Scholtens & Haizhen Yang, 2014. "Leading Indicators of Currency Crises: Are They the Same in Different Exchange Rate Regimes?," Open Economies Review, Springer, vol. 25(5), pages 937-957, November.
  • Handle: RePEc:kap:openec:v:25:y:2014:i:5:p:937-957
    DOI: 10.1007/s11079-014-9315-y
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    Cited by:

    1. Nakatani, Ryota, 2018. "Real and financial shocks, exchange rate regimes and the probability of a currency crisis," Journal of Policy Modeling, Elsevier, vol. 40(1), pages 60-73.

    More about this item

    Keywords

    Leading indicators; Currency crises; Exchange rate regimes; F31; F37; E42;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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