Leading Indicators of Currency Crises
July 1, 1997
Download PDF
More Formats on IMF eLibrary
Order a Print CopyDisclaimer: 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 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.
Subject: Central banks, Currency crises, Currency markets, Early warning systems, Financial crises, Financial markets, Foreign exchange, International reserves, Real exchange rates
Keywords: balance-of-payments crisis, banking crisis help, break, crisis, currency, Currency Crises, Currency markets, Early warning systems, exchange rate band, GDP, International reserves, Leading Indicators, looming crisis, money demand, money multiplier, nominal exchange rate, price level, procedure, Real exchange rates, self-fulfilling crisis, shadow exchange rate, short-term debt, Survey, WP
Pages:
43
Volume:
1997
DOI:
Issue:
079
Series:
Working Paper No. 1997/079
Stock No:
WPIEA0791997
ISBN:
9781451955866
ISSN:
1018-5941
Notes
Also published in Staff Papers, Vol. 45, No. 1, March 1998.
