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How Homogenous are Currency Crises? A Panel Study using Multiple-Response Models

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    Abstract

    This paper presents formal evidence that currency episodes display heterogeneity in terms of their evolution, their impact on the inflicted economy and their links with financial, political and macroeconomic fundamentals. Limited-dependent variable models for ordered and unordered outcomes along with their heteroskedastic and random effects extensions are applied on a large panel of data comprising 40 years of monthly observations on 23 developed countries. Heterogeneity, complemented by indications of self-fulfilling expectations and noise, suggest that time and region specific predictive approaches and policy responses are more useful than trying to base analysis and policy decisions on more general patterns. Results are established with formal specification tests.

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    File URL: http://www.lboro.ac.uk/departments/ec/Reasearchpapers/2004/How%20Homogenous%20are%20Currency%20Crises.pdf
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    Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2004_23.

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    Date of creation: Dec 2004
    Date of revision: Dec 2004
    Handle: RePEc:lbo:lbowps:2004_23
    Contact details of provider: Postal:
    Loughborough, Leicestershire, LE11 3TU

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    Fax: +44 (0) 1509 223910
    Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html

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    Keywords: Currency crises; speculative pressure; exchange rate; devaluation; Limited-dependent variable models.;

    Find related papers by JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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