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

Author

Listed:
  • Federico Marongiu

    (Universidad de Buenos Aires)

Abstract

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.

Suggested Citation

  • Federico Marongiu, 2005. "Towards A New Set Of Leading Indicators Of Currency Crisis For Developing Countries: An Application To Argentina," Public Economics 0512011, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwppe:0512011
    Note: Type of Document - pdf; pages: 37
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/pe/papers/0512/0512011.pdf
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    References listed on IDEAS

    as
    1. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," Center for International and Development Economics Research (CIDER) Working Papers 233424, University of California-Berkeley, Department of Economics.
    2. 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.
    3. Gian Maria Milesi Ferretti & Assaf Razin, 2000. "Current Account Reversals and Currency Crises: Empirical Regularities," NBER Chapters,in: Currency Crises, pages 285-323 National Bureau of Economic Research, Inc.
    4. Thomson Fontaine, 2005. "Currency Crises in Developed and Emerging Market Economies; A Comparative Empirical Treatment," IMF Working Papers 05/13, International Monetary Fund.
    5. Andrew Berg & Catherine Pattillo, 1999. "Are Currency Crises Predictable? A Test," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 1-1.
    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.
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    8. Mark Kruger & Patrick N. Osakwe & Jennifer Page, 2000. "Fundamentals, Contagion and Currency Crises: An Empirical Analysis," Development Policy Review, Overseas Development Institute, vol. 18(3), pages 257-274, September.
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    12. Maria Milesi-Ferretti, Gian & Razin, Assaf, 1998. "Sharp reductions in current account deficits An empirical analysis," European Economic Review, Elsevier, vol. 42(3-5), pages 897-908, May.
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    More about this item

    Keywords

    currency crisis - exchange rate - leading indicators - Argentina;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H - Public Economics

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