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Are Currency Crises Predictable?

Author

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  • Mr. Rodrigo O. Valdes
  • Mr. Ilan Goldfajn

Abstract

This paper studies whether exchange rate expectations and overvaluations are predictors of currency crises. The results suggest that overvaluation has predictive power in explaining crises. However, although expected depreciation obtained from survey data partially takes different measures of exchange rate misalignment into consideration, expectations fail to anticipate currency crises.

Suggested Citation

  • Mr. Rodrigo O. Valdes & Mr. Ilan Goldfajn, 1997. "Are Currency Crises Predictable?," IMF Working Papers 1997/159, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1997/159
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
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    6. Ilan Goldfajn & Rodrigo O. Valdés, 1999. "The Aftermath of Appreciations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 229-262.
    7. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 1997/079, International Monetary Fund.
    8. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    9. Paul Krugman, 1996. "Are Currency Crises Self-Fulfilling?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 345-407, National Bureau of Economic Research, Inc.
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