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IMF Staff Papers Logo    June 1999
Volume 46, Number 2
Are Currency Crises Predictable? A Test
By Andrew Berg and Catherine Pattillo

Full Text of this Article (PDF 224 K)
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Abstract: 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. Two of the models fail to provide useful forecasts. One model provides forecasts that are somewhat informative though still not reliable. Plausible modifications to this model improve its performance, providing some hope that future models may do better. This exercise suggests, though, that while forecasting models may help indicate vulnerability to crisis, the predictive power of even the best of them may be limited. [JEL F31, F47]

1999 International Monetary Fund