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Indicators of financial crises do work! An early-warning system for six Asian countries

Author

Listed:
  • Lestano

    (Department of Economics Univeristy of Groningen)

  • Jan Jacobs

    (Department of Economics Univeristy of Groningen)

  • Gerard H. Kuper

    (Department of Economics Univeristy of Groningen)

Abstract

Indicators of financial crisis generally do not have a good track record. This paper presents an early warning system for six countries in Asia, in which indicators do work.We distinguish three types of financial crises, currency crises, banking crises and debt crises, and extract four groups of indicators from the literature—external, financial, domestic (real and public), and global indicators—that are likely to affect the probability of financial crises. The significance of the indicator groups is tested in a multivariate logit model on a panel of six Asian countries for the period 1970:01-2001:12. An additional feature is that we examine four different currency crisis dating definitions. A within-sample signal extraction experiment reveals that some currency crises dating schemes outperform others.

Suggested Citation

  • Lestano & Jan Jacobs & Gerard H. Kuper, 2004. "Indicators of financial crises do work! An early-warning system for six Asian countries," International Finance 0409001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpif:0409001
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    References listed on IDEAS

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    More about this item

    Keywords

    financial crises; currency crises; banking crises; debt crises; early warning system; panel data; multivariate logit; factor analysis;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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