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Leading indicators of balance-of-payments crises: a partial review

  • Michael Chui
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    This paper reviews the theory of balance-of-payments crises, and its implications for identifying potential leading indicators of crises. It discusses and evaluates three different empirical approaches to balance-of-payments crises: the signalling, discrete-choice, and structural approaches. Despite claims of success in predicting currency crises, we note some serious theoretical and empirical qualifications which throw these claims into question. Nevertheless, we conclude that a range of indicators supported by theory may still be useful for policy-makers interested in preventing financial instability.

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    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/2002/wp171.pdf
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    Paper provided by Bank of England in its series Bank of England working papers with number 171.

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    Date of creation: Dec 2002
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    Handle: RePEc:boe:boeewp:171
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