This article investigates the predictive power of qualitative response models that can serve as the basis for an early warning system for currency crises. It employs a signals framework that monitors the behaviour of key economic variables and issues a warning when their values exceed certain critical levels. The analysis is carried out for a parsimonious specification with high-frequency data. Taking Egypt as a case study, it is shown that this class of probability models captures to a good extent the turbulence in the foreign exchange market and the onset of crises.

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This article analyses the strategic moves of governments and investors under privatization programs in a game-theoretic context. In sequential-move games of both perfect information and incomplete information, the best response of the strategic investors to observing a slow pace of privatization is to have a low participation in economic activity because of concerns over public policy credibility. This is true even if the government chooses to randomize its action to send mixed signals to the investors while adopting a slow pace of privatization for budgetary reasons. However, the outcome is Pareto inferior to a situation of phased but fast implementation of privatization programs and high private-sector participation under plausible assumptions.