On the determinants of currency crises: The role of model uncertainty

Jesús Crespo-Cuaresma () and Tomas Slacik ()
Authors registered in the RePEc Author Service: Jesus Crespo Cuaresma

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

Abstract: We tackle explicitly the issue of model uncertainty in the framework of binary variable models of currency crises. Using Bayesian model averaging techniques, we assess the robustness of the explanatory variables proposed in the recent literature for both static and dynamic models. Our results indicate that the variables belonging to the set of macroeconomic fundamentals proposed by the literature are very fragile determinants of the occurrence of currency crises. The results improve if the crisis index identifies a crisis period (defined as the period up to a year before a crisis) instead of a crisis occurrence. In this setting, the extent of real exchange rate misalignment and financial market indicators appear as robust determinants of crisis periods.

Keywords: Forecasting; model averaging; Bayesian econometrics; exchange rates (search for similar items in EconPapers)
JEL-codes: E43 F31 F34 (search for similar items in EconPapers)
Pages: 30
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mon
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Citations: View citations in EconPapers (26)

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Related works:
Journal Article: On the determinants of currency crises: The role of model uncertainty (2009)
Journal Article: On the Determinants of Currency Crises: The Role of Model Uncertainty (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2008-03

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