IDEAS home Printed from https://ideas.repec.org/p/red/sed009/1045.html

An Early Warning Signals Approach to the Currency Crises: The Turkish Case

Author

Listed:
  • Ali ARI

Abstract

The global economic and financial instability context of the 1990s and 2000s also affected the Turkish economy. Actually, the 1980s in Turkey are characterized by a radical transformation of its economy through significant efforts of liberalization. With an out-looking economy and a liberalized financial system in the early 1990s, Turkey was an example of successful liberalization process for the other developing countries. However, this "remarkable" liberalization process, which was performed without ex ante correction of persistent macroeconomic imbalances, worsened economic and financial instabilities and caused two severe crises in April 1994 and February 2001. This paper aims to illustrate the essential causes of these crises by developing a binominal and multivariate logit model which estimates the predictive ability of 16 economic and financial indicators in a sample that covers the period January 1990-December 2002. In addition, the paper evaluates the out-of-sample forecast performance of the model in the period January 2003-December 2008 in which two other currency crises occurred in May 2006 and October 2008. The paper finds that the Turkish crises are mainly due to excessive budget deficits, high money supply growths, sharp rises in short-term external debt, growing riskiness of the banking system (in particular currency and liquidity mismatches), and external adverse shocks.

Suggested Citation

  • Ali ARI, 2009. "An Early Warning Signals Approach to the Currency Crises: The Turkish Case," 2009 Meeting Papers 1045, Society for Economic Dynamics.
    • Handle: RePEc:red:sed009:1045
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cristian STANCIU, 2010. "A review of early warning system models," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(11), pages 222-228, May.
    2. Cristian Stanciu, 2012. "The Financial Crisis And The Early Warning System Models," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 3(40), pages 67-80.
    3. Lanbiao Liu & Chen Chen & Bo Wang, 2022. "Predicting financial crises with machine learning methods," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(5), pages 871-910, August.

    More about this item

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • G01 - Financial Economics - - General - - - Financial Crises

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed009:1045. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.