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Leading Indicators of Currency Crises

Author

Listed:
  • Reinhart, Carmen
  • Kaminsky, Graciela
  • Lizondo, Saul

Abstract

This papers examines the empirical literature on currency crises and proposes a specific early warning system. This system involves monitoring the evolution of several indicators that tend to exhibit unusual behaviorin the periods preceding a crisis. When an indicator exceeds a certain threshold value, this is interpreted as a warning "signal" that a currency crisis may take place within the following 24 months. The variables that have the best track record within this approach include exports, deviations of the real exchange rate from trend, the ratio of broad money to international reserves, output, and equity prices.

Suggested Citation

  • Reinhart, Carmen & Kaminsky, Graciela & Lizondo, Saul, 1998. "Leading Indicators of Currency Crises," MPRA Paper 6981, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:6981
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    File URL: https://mpra.ub.uni-muenchen.de/6981/1/MPRA_paper_6981.pdf
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    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F3 - International Economics - - International Finance
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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