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Currency Crises: Is Central America Different?

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  • Gerardo Esquivel
  • Felipe Larraín

Abstract

In a recent paper we analyzed the determinants of currency crises in a sample of 30 high and middle income countries (Esquivel and Larraín, 1998). In this work we focus on Central America and analyze whether the determinants of currency crises in this region are different from those identified in our previous work. We conclude that they are not, and show that a small set of macroeconomic variables helps to explain the currency crises that took place in Central America between 1976 and 1996. The results of tests applied here support the empirical approach that attempts to explain currency crises by focusing on the behavior of a few macroeconomic indicators. Part of the interest of this result stems from the fact that the Central American countries had an exchange rate system markedly different from that prevailing in the economies that are usually analyzed in similar studies.

Suggested Citation

  • Gerardo Esquivel & Felipe Larraín, 1999. "Currency Crises: Is Central America Different?," CID Working Papers 26, Center for International Development at Harvard University.
    • Handle: RePEc:wop:cidhav:26
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    References listed on IDEAS

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    Cited by:

    1. Beckmann, Daniela & Menkhoff, Lukas & Sawischlewski, Katja, 2006. "Robust lessons about practical early warning systems," Journal of Policy Modeling, Elsevier, vol. 28(2), pages 163-193, February.

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    More about this item

    Keywords

    Central America; exchange rate; currency crises; financial crises;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean

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