IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Leading indicators of currency crises

  • Kaminsky, Graciela
  • Lizondo, Saul
  • Reinhart, Carmen M.

The authors examine the empirical evidence on currency crises and propose a specific early-warning system. This system involves monitoring the evolution of several indicators that tend to exhibit unusual behavior in the periods preceding a crisis. An indicator exceeding a certain threshold value should be interpreted as a warning"signal"that a currency crisis may take place within the following 24 months. The threshold values are calculated to strike a balance between the risk of having many false signals and the risk of missing many crises. Within this approach, the variables with the best track record include exports, deviations of the real exchange rate from trend, the ratio of broad money to gross international reserves, output, and equity prices. The evidence does not support some of the other indicators that were considered, including imports, bank deposits,the difference between foreign and domestic real deposit interest rates, and the ratio of lending to deposit interest rates.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1852.

in new window

Date of creation: 30 Nov 1997
Date of revision:
Handle: RePEc:wbk:wbrwps:1852
Contact details of provider: Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Garber, P.M. & Svensson, L.E.O., 1994. "The Operation and Collapse of Fixed Exchange Rate Regimes," Papers 588, Stockholm - International Economic Studies.
  2. Carmen M. Reinhart & Sara Calvo, 1996. "Capital Flows to Latin America: Is There Evidence of Contagion Effects?," Peterson Institute Press: Chapters, in: Guillermo A. Calvo & Morris Goldstein & Eduard Hochreiter (ed.), Private Capital Flows to Emerging Markets After the Mexican Crisis, pages 151-171 Peterson Institute for International Economics.
  3. Pierre-Richard Agenor & Jagdeep S. Bhandari & Robert P. Flood, 1991. "Speculative Attacks and Models of Balance-of-Payments Crises," NBER Working Papers 3919, National Bureau of Economic Research, Inc.
  4. Michael W. Klein & Nancy P. Marion, 1994. "Explaining the Duration of Exchange-Rate Pegs," NBER Working Papers 4651, National Bureau of Economic Research, Inc.
  5. Kamin, S.B., 1988. "Devaluation, External Balance, And Macroeconomic Performance: A Look At The Numbers," Princeton Studies in International Economics 62, International Economics Section, Departement of Economics Princeton University,.
  6. Stefan Gerlach & Frank Smets, 1994. "Contagious speculative attacks," BIS Working Papers 22, Bank for International Settlements.
  7. Dellas, H. & Stockman, A.C., 1988. "Self-Fullfilling Expectations, Speculative Attacks And Capital Controls," RCER Working Papers 138, University of Rochester - Center for Economic Research (RCER).
  8. Guillermo A. Calvo, 1995. "Varieties of Capital-Market Crises," IDB Publications (Working Papers) 5721, Inter-American Development Bank.
  9. Flood, Robert & Marion, Nancy, 1997. "The size and timing of devaluations in capital-controlled economies," Journal of Development Economics, Elsevier, vol. 54(1), pages 123-147, October.
  10. Blanco, Herminio & Garber, Peter M, 1986. "Recurrent Devaluation and Speculative Attacks on the Mexican Peso," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 148-66, February.
  11. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
  12. Humberto Mora A. & Juan Manuel Julio & Santiago Herrera A., 1991. "Crisis cambiaria en un sistema con minidevaluaciones : el caso colombiano," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 10(20), pages 7-51, Diciembre.
  13. Ozkan, F Gulcin & Sutherland, Alan, 1995. "Policy Measures to Avoid a Currency Crisis," Economic Journal, Royal Economic Society, vol. 105(429), pages 510-19, March.
  14. Rudger Dornbusch & Ilan Goldfajn & Rodrigo O. Valdés, 1995. "Currency Crises and Collapses," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 219-294.
  15. Pierre-Richard Agénor & Jagdeep S. Bhandari & Robert P. Flood, 1992. "Speculative Attacks and Models of Balance of Payments Crises," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 357-394, June.
  16. Edin, P.A. & Vredin, A., 1991. "Devaluation Risk in Target Zones: Evidence from the Nordic Countries," Papers 1991g, Uppsala - Working Paper Series.
  17. Ceyla Pazarbasioglu & Inci Ötker, 1994. "Exchange Market Pressures and Speculative Capital Flows in Selected European Countries," IMF Working Papers 94/21, International Monetary Fund.
  18. Blackburn, Keith & Sola, Martin, 1993. " Speculative Currency Attacks and Balance of Payments Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 7(2), pages 119-44, June.
  19. Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency crashes in emerging markets: an empirical treatment," International Finance Discussion Papers 534, Board of Governors of the Federal Reserve System (U.S.).
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1852. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.