Assessing the Currency Crises in Turkey
This study presents the significance of the currency crises, discusses the related literature and applies a model of economic vulnerability to Turkey during 1985Q2-2004Q2. The common approach in currency crisis literature is to focus on the performance of thresholds for a set of early warning indicators. Following the explanation of “Index of Speculative Pressure” (ISP), Granger causes of the ISP is discussed. The study shows that, current account/ GDP ratio, M2/international reserves ratio, real credit growth and current account/foreign direct investment ratio are Granger causes of the ISP at 1% level. Then by using Vector Auto Regression (VAR) model, the ISP index is forecasted. The study shows that the combination of VAR(1)+VAR(2)+VAR(5) models generate relatively better forecast values than all other single models. Finally the study estimates dynamic probit and logit models by using maximum likelihood to predict currency crises. It shows that logit model gives a better performance than the probit, for a better prediction of the probabilities of the Turkish currency crises. The most important contribution of this study is to show that the logit model has a very high performance in the prediction of Turkish currency crises. It can be used to foresee forthcoming currency crises. Also the forecast of the ISP (as a level) is giving very successful results. It is observed that the ISP and forecasted ISP values are almost moving together or very close to each other.
Volume (Year): 6 (2006)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: Head Office, Istiklal Cad. 10 Ulus, 06100 Ankara|
Phone: (90 312) 507 5000
Fax: (90 312) 507 5640
Web page: http://www.tcmb.gov.tr/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 97/79, International Monetary Fund.
- Reinhart, Carmen & Kaminsky, Graciela & Lizondo, Saul, 1998. "Leading Indicators of Currency Crises," MPRA Paper 6981, University Library of Munich, Germany.
- Kaminsky, Graciela & Lizondo, Saul & Reinhart, Carmen M., 1997. "Leading indicators of currency crises," Policy Research Working Paper Series 1852, The World Bank.
- Kumar, Mohan & Moorthy, Uma & Perraudin, William, 2003. "Predicting emerging market currency crashes," Journal of Empirical Finance, Elsevier, vol. 10(4), pages 427-454, September.
- W. R. M. Perraudin & Manmohan S. Kumar & Uma Moorthy, 2002. "Predicting Emerging Market Currency Crashes," IMF Working Papers 02/7, International Monetary Fund.
- Clive Granger & Yongil Jeon, 2004. "Forecasting Performance of Information Criteria with Many Macro Series," Journal of Applied Statistics, Taylor & Francis Journals, vol. 31(10), pages 1227-1240.
- Hafer, R. W. & Sheehan, Richard G., 1989. "The sensitivity of VAR forecasts to alternative lag structures," International Journal of Forecasting, Elsevier, vol. 5(3), pages 399-408.
- Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
- Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-144, January.
- Eichengreen, Barry, 2002. "Financial Crises and What to Do About Them," OUP Catalogue, Oxford University Press, number 9780199257447.
- Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 2002. "The Role of Large Players in Currency Crises," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 197-268 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:tcb:cebare:v:6:y:2006:i:1:p:37-64. 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: ()or () or ()
If references are entirely missing, you can add them using this form.