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Financial Crisis Prediction: Specification of Pre-crisis Periods in Turkey, Argentina and Thailand


  • Petr Hájek


In this article is studied hypothesis, that every period (time interval) before financial crisis is distinguished by co-movement of several variables. The study is based on monthly data (that means no quarterly data, like portfolio investment, were used). This hypothesis, tested with vector autoregression (VAR), was to define period of time, in which a specific country is under permanent risk of falling from the edge to financial crisis (only waiting for the trigger). Variables used in this study are foreign liabilities of domestic banks (showing foreign exposure of banking sector), gross international reserves (usually rises before crisis, because of central bank's defense against appreciation pressures caused by capital inflow), domestic credit (showing domestic indebtedness, in the study, this variable was lagged by 3 months) and profitability comparison with S&P 500 index in dollar recounted domestic main asset market indices. Studied countries were: Turkey, Argentina and Thailand. In every studied case, there was found several months-to-years lasting period, that confirmed accuracy of co-movement hypothesis at 1%level of significance and, also, asset market bubbles in those pre-crisis periods were found.

Suggested Citation

  • Petr Hájek, 2005. "Financial Crisis Prediction: Specification of Pre-crisis Periods in Turkey, Argentina and Thailand," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2005(1), pages 57-69.
  • Handle: RePEc:prg:jnlaop:v:2005:y:2005:i:1:id:134:p:57-69

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    References listed on IDEAS

    1. Bijan B. Aghevli & Eduardo Borensztein & Tessa Van der Willigen, 1992. "Stabilization and Structural Reform in the Czech and Slovak Federal Republic; First Stage," IMF Occasional Papers 92, International Monetary Fund.
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    More about this item


    financial crisis prediction; vector autoregression; asset markets; bubbles;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements


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