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Forecasting Financial Crises and Contagion in Asia using Dynamic Factor Analysis

  • Andrea Cipollini

    ()

  • George Kapetanios

    ()

In this paper we use principal components analysis to obtain vulnerability indicators able to predict financial turmoil. Probit modelling through principal components and also stochastic simulation of a Dynamic Factor model are used to produce the corresponding probability forecasts regarding the currency crisis events a®ecting a number of East Asian countries during the 1997-1998 period. The principal components model improves upon a number of competing models, in terms of out-of-sample forecasting performance.

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File URL: http://www.recent.unimore.it/wp/RECent-wp14.pdf
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Paper provided by University of Modena and Reggio E., Dept. of Economics "Marco Biagi" in its series Center for Economic Research (RECent) with number 014.

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Length: pages 21
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:mod:recent:014
Contact details of provider: Web page: http://www.recent.unimore.it/

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