An "Almost-Too-Late" Warning Mechanism For Currency Crises

Jesús Crespo-Cuaresma (jesus.crespo-cuaresma@uibk.ac.at) and Tomas Slacik (tomas.slacik@oenb.at)
Authors registered in the RePEc Author Service: Jesus Crespo Cuaresma

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

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)
Pages: 26
Date: 2007-06
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-tra
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Citations: View citations in EconPapers (2)

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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:inn:wpaper:2007-10

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