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A Perspectiveon Predicting Currency Crises

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  • Mr. Robert P Flood
  • Juan Yepez
  • Ms. Nancy P. Marion

Abstract

Currency crises are difficult to predict. It could be that we are choosing the wrong variables or using the wrong models or adopting measurement techniques not up to the task. We set up a Monte Carlo experiment designed to evaluate the measurement techniques. In our study, the methods are given the right fundamentals and the right models and are evaluated on how closely the estimated predictions match the objectively correct predictions. We find that all methods do reasonably well when fundamentals are explosive and all do badly when fundamentals are merely highly volatile.

Suggested Citation

  • Mr. Robert P Flood & Juan Yepez & Ms. Nancy P. Marion, 2010. "A Perspectiveon Predicting Currency Crises," IMF Working Papers 2010/227, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2010/227
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    References listed on IDEAS

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    Cited by:

    1. Mohammad Karimi & Marcel‐Cristian Voia, 2019. "Empirics of currency crises: A duration analysis approach," Review of Financial Economics, John Wiley & Sons, vol. 37(3), pages 428-449, July.

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