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

  • Lestano

    (Department of Economics University of Groningen)

  • Jan Jacobs

    (Department of Economics University of Groningen)

  • Gerard H. Kuper

    (Department of Economics University of Groningen)

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.

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Paper provided by EconWPA in its series International Finance with number 0409004.

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Date of creation: 08 Sep 2004
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Handle: RePEc:wpa:wuwpif:0409004
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