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Are Currency Crises Predictable? A Test

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  • Ms. Catherine A Pattillo
  • Mr. Andrew Berg

Abstract

This paper evaluates three models for predicting currency crises that were proposed before 1997. The idea is to answer the question: if we had been using these models in late 1996, how well armed would we have been to predict the Asian crisis? The results are mixed but somewhat encouraging. One model, and our modifications to it, provide useful forecasts, at least compared with a naive benchmark. The head-to-head comparison also sheds light on the economics of currency crises, the nature of the Asian crisis, and issues in the empirical modeling of currency crises.

Suggested Citation

  • Ms. Catherine A Pattillo & Mr. Andrew Berg, 1998. "Are Currency Crises Predictable? A Test," IMF Working Papers 1998/154, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:1998/154
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    WP; probability of crisis; KLR crisis date; crisis index; currency crisis; Currency crises; vulnerability indicators; Asian crisis; balance of payments crises; crisis prediction; crisis countries Thailand; crisis probability; crisis date; Real exchange rates; Early warning systems; Probit models; Current account; Global; Asia and Pacific; Africa;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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