Leading Indicators of Currency Crises
Electronic Access:
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Summary:
This paper examines the empirical evidence on currency crises and proposes a specific early warning system. This system involves monitoring the evolution of several indicators that tend to exhibit an unusual behavior in the periods preceding a crisis. When an indicator exceeds a certain threshold value, this is interpreted as a warning “signal” that a currency crisis may take place within the following 24 months. The variables that have the best track record within this approach include exports, deviations of the real exchange rate from trend, the ratio of broad money to gross international reserves, output, and equity prices.
Series:
Working Paper No. 1997/079
Subject:
Central banks Currency crises Currency markets Early warning systems Financial crises Financial markets Foreign exchange International reserves Real exchange rates
Notes:
Also published in Staff Papers, Vol. 45, No. 1, March 1998.
English
Publication Date:
July 1, 1997
ISBN/ISSN:
9781451955866/1018-5941
Stock No:
WPIEA0791997
Pages:
43
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