Indicators of Currency Crisis: Empirical Analysis of Some Emerging and Transition Economies

Jakubiak, Małgorzata

doi:10.2139/ssrn.1445379

Cited by 8 publications

(3 citation statements)

References 11 publications

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“…7) See Ganev (2003), IMF (1999), Horvath (2003), and Kharas et al (2001) for the description of crises in each country. Similar crisis dates are obtained by Brüggemann and Linne (2002), Jakubiak (2000), Pasternak (2003), and Siwińska (2000) with different crisis-identification criteria.…”

Section: Discussionsupporting

confidence: 66%

Determinants of Financial Crises in Russia and Other Transition Economies: An Empirical Test

Zinkovskaya

2008

JJCE

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Abstract： The goal of this study is to assess the relative contributions of different vulnerability factors to the crises in Russia and other European transition economies. The results of probit estimations and decomposition of simulated crisis probabilities suggest that external capital flows and financial sector weaknesses played a crucial part in undermining the stability of the currencies. The government finance problems and real appreciation, commonly thought to be the main causes of the crises, had a comparatively minor role in the financial turmoil in Russia and other transition economies. ［Keywords： financial crisis, currency crisis, exchange market pressure, probit］ [Article]

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Section: Discussionsupporting

confidence: 66%

Determinants of Financial Crises in Russia and Other Transition Economies: An Empirical Test

Zinkovskaya

2008

JJCE

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“…Kaminsky, Lizondo and Reinhart (1998) (KLR) observe the indicators displaying an unusual behavior before the financial crisis. Jakubiak (2000) look for the components of the Exchange Market Pressure Index or 14 historical cases considered by the experts as a currency crisis. Bussiere and Fratzscher (2006) have developed a multinomial logit regression-based early warning system that allows differentiation between calm periods, crisis periods and post-crisis periods.…”

Section: Literature Reviewmentioning

confidence: 99%

Index of Currency Market Turbulence and Estimation of Leading Indicators: The Case of Turkey

Akkaya

2020

Beykoz Akademi Dergisi

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A currency crisis is a condition in which the exchange rate significantly depreciates for a short period of time. Currency crises have significant economic and social consequences. Therefore, many indices are created to determine the degree of pressure in economies and to forecast the financial crises. According to the Signal Approach, it is thought that a variable gives a warning signal that a crisis may occur if a variable goes beyond a certain threshold level. The main purpose of this study to investigate the validity of the Index of Currency Market Turbulence developed by Kaminsky and Reinhart for Turkey in the period January 1999-December 2019. The results show that the Index is working, and the formula is correct. The another aim is to determine the leading indicators with respect to the Index of Currency Market Turbulence in the prediction of crises by Vector Auto Regressive (VAR) Model. The leading indicators causing financial crises, are tried to be determined by using Index of Currency Market Turbulence. Vector Autoregressive analysis results show that Unemployment Ratio, Exports/Import ratio, and the Non-Residents' Equity Portfolio are exogenous, and other variables are not. Granger Causality test results show that the Unemployment Rate, Net International Reserves, US Dollar /TRL Currency Buying Rate and the Non-Residents' Equity Portfolio can be used as leading indicators. VAR analysis, variance decomposition and Granger Causality test results show that Unemployment Rate (UR), Net International Reserves (NIR), US Dollar/ TRL Buying Rate (USD/TRL), the Equity Portfolio of Non-Residents (NREP) can be used as leading indicators.

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“…According to Agenor (1997), Alves et al (2004), Choi (2000), Glick and Hutchison (2013), Jakubiak (2000) and Kaufman (2000), a currency crisis is defined as a sharp devaluation or depreciation of the currency that is preceded or accompanied by a sharp drop in foreign reserves. A crisis could be signalled by the tendency of individuals, firms and institutions to convert financial and monetary assets from local to foreign currency to avoid an expected decline that may occur as a result of a macroeconomic imbalance.…”

Section: Introductionmentioning

confidence: 99%

Identifying currency crises indicators: the case of Egypt

Adams

Metwally

2019

AJEMS

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Purpose The purpose of this paper is to identify the indicators of currency crises in Egypt. Using the annual data over the period 1977–2017, the paper attempts to establish which economic variable(s) are more useful in predicting currency crises and to improve the predictability of such crises. Design/methodology/approach Probit analysis is employed to identify the indicators that are most effective in predicting the probability that a currency crisis episode will occur. This is enabled through the estimation of a market turbulence index (MTI) which measures currency crises in terms of eight “threshold” points at which a crisis is detected or not detected. Findings The estimates of the probit model suggest that five variables: the domestic interest rate spread; domestic current account; USA interest rate; real exchange rate; and the real interest rate have the strongest predictive power among the 16 indicators identified in the empirical literature. Research limitations/implications There are a number of limitations associated with this paper. First the data are annual and not monthly which limits the ability of the estimated model to accurately predict the crisis episodes. There is limited open access to monthly data on the Central Bank of Egypt website especially for the period before the 2000s. Were such data available this would allow for much more robust in-sample and out of sample forecasts. Practical implications The analysis and results in the paper suggest that the modelling strategy employed represents a potentially useful tool for Central Banks and policy makers in forecasting currency crises. Social implications There are several such implications but mainly in relation to the possibility of avoiding high social costs resulting from a currency crisis that may have been avoided if forecast correctly. Originality/value The paper builds on previous theoretical and empirical work in this field while adding to the literature in terms of the problems in previous literature and modelling approaches. It also strongly advocates the use of the MTI instead of other indices to identify such crises.

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Indicators of Currency Crisis: Empirical Analysis of Some Emerging and Transition Economies

Cited by 8 publications

References 11 publications

Determinants of Financial Crises in Russia and Other Transition Economies: An Empirical Test

Determinants of Financial Crises in Russia and Other Transition Economies: An Empirical Test

Index of Currency Market Turbulence and Estimation of Leading Indicators: The Case of Turkey

Identifying currency crises indicators: the case of Egypt

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