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Staff Papers Logo    March 1998
Volume 45, Number 1
Leading Indicators of Currency Crisis
By Graciela Kaminsky, Saul Lizondo, and Carmen Reinhart

Full Text of This Article (PDF 2,705 K)

Abstract: This paper examines the empirical evidence on currency crisis and propopses a specific early warning system. This system involves monitoring the evolution of several indicators that tend to exhibit an unusual behavior in periods preceeding 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 from 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. [JEL F31,F47]

1998 International Monetary Fund