Are Currency Crises Predictable? A Test

Author/Editor:

Catherine A Pattillo ; Andrew Berg

Publication Date:

November 1, 1998

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper evaluates three models for predicting currency crises that were proposed before 1997. The idea is to answer the question: if we had been using these models in late 1996, how well armed would we have been to predict the Asian crisis? The results are mixed but somewhat encouraging. One model, and our modifications to it, provide useful forecasts, at least compared with a naive benchmark. The head-to-head comparison also sheds light on the economics of currency crises, the nature of the Asian crisis, and issues in the empirical modeling of currency crises.

Series:

Working Paper No. 1998/154

Subject:

Balance of payments Currency crises Current account Early warning systems Econometric analysis Financial crises Foreign exchange Probit models Real exchange rates

English

Publication Date:

November 1, 1998

ISBN/ISSN:

9781451857207/1018-5941

Stock No:

WPIEA1541998

Pages:

61

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