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Forecasting Financial Crises and Contagion in Asia using Dynamic Factor Analysis

  • Andrea Cipollini

    ()

    (University of Essex)

  • George Kapetanios

    (Queen Mary, University of London)

In this paper we use a Dynamic Factor model to retrieve vulnerability indicators able to predict financial turmoil. A stochastic simulation experiment is then 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 Dynamic factor model improves upon a number of competing model, in terms of out of sample forecasting performance

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 477.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:477
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