An "almost-too-late" warning mechanism for currency crises

Jesus Crespo Cuaresma and Tomás Slacik

No 4/2007, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: We propose exploiting the term structure of relative interest rates to obtain estimates of changes in the timing of a currency crisis as perceived by market participants.Our indicator can be used to evaluate the relative probability of a crisis occurring in one week as compared to a crisis happening after one week but in less than a month.We give empirical evidence that the indicator performs well for two important currency crises in Eastern Europe: the crisis in the Czech Republic in 1997 and the Russian crisis in 1998.

Keywords: Currency crisis; term structure of interest rates; transition economies (search for similar items in EconPapers)
JEL-codes: E43 F31 F34 (search for similar items in EconPapers)
Date: 2007
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Related works:
Working Paper: An "Almost-Too-Late" Warning Mechanism For Currency Crises (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:bdp2007_004

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