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The Global Financial Crisis and currency crises in Latin America

  • Kuper, Gerard H.
  • Jacobs, Jan P.A.M.
  • Boonman, Tjeerd M.

    (Groningen University)

The Global Financial Crisis (GFC) has a ected many regions including Latin America. This paper focuses on currency crises in Argentina, Brazil and Mexico. We estimate an Early Warning System, consisting of a dynamic factor model and an ordered logit model, with monthly data for 1990-2007. Ex ante forecasts for 2008-2009 do not produce currency crises in the fall of 2008, in sharp contrast with reality. Our model only predicts an increased probability of a currency crisis for Argentina in 2009.

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Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 12005-EEF.

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Date of creation: 2012
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Handle: RePEc:dgr:rugsom:12005-eef
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  4. Jeffrey D. Sachs & Aaron Tornell & Andrés Velasco, 1996. "Financial Crises in Emerging Markets: The Lessons from 1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 147-216.
  5. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2010. "Exchange Rate Flexibility Across Financial Crises," Working Papers 2010-08, CEPII research center.
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  8. Kaminsky, Graciela L., 2006. "Currency crises: Are they all the same?," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 503-527, April.
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  11. Alvarez-Plata, Patricia & Schrooten, Mechthild, 2004. "Misleading indicators? The Argentinean currency crisis," Journal of Policy Modeling, Elsevier, vol. 26(5), pages 587-603, July.
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  13. Girton, Lance & Roper, Don, 1977. "A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience," American Economic Review, American Economic Association, vol. 67(4), pages 537-48, September.
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  16. Breitung, Jörg & Eickmeier, Sandra, 2005. "Dynamic factor models," Discussion Paper Series 1: Economic Studies 2005,38, Deutsche Bundesbank, Research Centre.
  17. Jacobs, Jan P.A.M. & Kuper, Gerard H. & Lestano, 2005. "Currency crises in Asia: a multivariate logit approach," CCSO Working Papers 200506, University of Groningen, CCSO Centre for Economic Research.
  18. James H. Stock & Mark W. Watson, 1998. "Diffusion Indexes," NBER Working Papers 6702, National Bureau of Economic Research, Inc.
  19. Atsushi Inoue & Barbara Rossi, 2008. "Monitoring and Forecasting Currency Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 523-534, 03.
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  22. Porzecanski, Arturo C., 2009. "Latin America: The Missing Financial Crisis," MPRA Paper 18780, University Library of Munich, Germany.
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