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Towards A New Set Of Leading Indicators Of Currency Crisis For Developing Countries: An Application To Argentina

  • Federico Marongiu

    (Universidad de Buenos Aires)

Currency and financial crises are determinants of growth and development, mainly in developing countries subject to shocks, contagion and volatility. A relevant issue when trying to do the implementation of development policies is to anticipate or forecast the occurrence of currency crises that could turn good ideas into failure. This type of crises have strong negative economic, social and political consequences. This paper takes a look in the leading indicators literature and shows that this approach failed in predicting the Argentinean collapse of 2001-2002. We also show that particular features of the Argentinean economy needed of different indicators to forecast the collapse of the currency board system. The paper also developes some new indicators to include in an Early Warning System that can take on account specific features of Argentina´s economy. This indicators can be integrated into a wider set in order to be a useful tool for policymakers and authorities in Argentina and in other developing countries in the planification and implementation of development policies and programs.

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Paper provided by EconWPA in its series Public Economics with number 0512011.

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Length: 37 pages
Date of creation: 23 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwppe:0512011
Note: Type of Document - pdf; pages: 37
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  1. Graciela Laura Kaminsky, 1999. "Currency and Banking Crises: The Early Warnings of Distress," IMF Working Papers 99/178, International Monetary Fund.
  2. Kruger, Mark & Osakwe, Patrick N. & Page, Jennifer, 1998. "Fundamentals, Contagion and Currency Crises: An Empirical Analysis," Staff Working Papers 98-10, Bank of Canada.
  3. Milesi-Ferretti, Gian Maria & Razin, Assaf, 1998. "Current Account Reversals and Currency Crises: Empirical Regularities," CEPR Discussion Papers 1921, C.E.P.R. Discussion Papers.
  4. Gian Maria Milesi-Ferrett & Assaf Razin, 1997. "Sharp Reductions in Current Account Deficits: An Empirical Analyis," NBER Working Papers 6310, National Bureau of Economic Research, Inc.
  5. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 97/79, International Monetary Fund.
  6. Magdalena Tomczynska, 2000. "Early Indicators of Currency Crises. Review of some literature," CASE Network Studies and Analyses 0208, CASE-Center for Social and Economic Research.
  7. Thomson Fontaine, 2005. "Currency Crises in Developed and Emerging Market Economies: A Comparative Empirical Treatment," IMF Working Papers 05/13, International Monetary Fund.
  8. Andrew Berg & Catherine Pattillo, 1999. "Are Currency Crises Predictable? A Test," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 1.
  9. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
  10. Jeffrey J. Frankel and Andrew K. Rose., 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," Center for International and Development Economics Research (CIDER) Working Papers C96-062, University of California at Berkeley.
  11. Nada Choueiri & Graciela Laura Kaminsky, 1999. "Has the Nature of Crises Changed? A Quarter Century of Currency Crises in Argentina," IMF Working Papers 99/152, International Monetary Fund.
  12. Nouriel Roubini & Paul Wachtel, 1997. "Current Account Sustainability in Transition Economies," Working Papers 97-03, New York University, Leonard N. Stern School of Business, Department of Economics.
  13. Patricia Alvarez-Plata & Mechthild Schrooten, 2003. "Mis-Leading Indicators?: The Argentinean Currency Crisis," Discussion Papers of DIW Berlin 327, DIW Berlin, German Institute for Economic Research.
  14. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  15. Burkart, O. & Coudert, V., 2000. "Leading Indicators of Currency Crises in Emerging Economies," Working papers 74, Banque de France.
  16. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
  17. Burkart, Oliver & Coudert, Virginie, 2002. "Leading indicators of currency crises for emerging countries," Emerging Markets Review, Elsevier, vol. 3(2), pages 107-133, June.
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