Are Currency Crises Predictable?

ByRodrigo O. Valdes, Ilan Goldfajn

December 1, 1997

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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 studies whether exchange rate expectations and overvaluations are predictors of currency crises. The results suggest that overvaluation has predictive power in explaining crises. However, although expected depreciation obtained from survey data partially takes different measures of exchange rate misalignment into consideration, expectations fail to anticipate currency crises.

Subject: Currency crises, Cyclical indicators, Economic growth, Exchange rates, Financial crises, Foreign exchange, Real exchange rates

Keywords: balance-of-payments crisis, crisis, crisis episode, crisis month, Currency crises, Cyclical indicators, devaluation, devaluation measure, devaluation rate, exchange rate crisis, Exchange rates, misalignment estimate, nominal devaluation, overvaluation measure, Real exchange rates, WP

Pages:
19
Volume:
1997
DOI:
https://doi.org/10.5089/9781451857634.001
Issue:
159
Series:
Working Paper No. 1997/159
Stock No:
WPIEA1591997
ISBN:
9781451857634
ISSN:
1018-5941

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