How Homogenous are Currency Crises? A Panel Study using Multiple-Response Models

Tassos Anastasatos () and Ian R. Davidson ()
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Tassos Anastasatos: Dept of Economics Univ. of Loughborough
Ian R. Davidson: Business School Univ. of Loughborough

Discussion Paper Series from Department of Economics, Loughborough University

Abstract: This paper presents formal evidence that currency episodes display heterogeneity in terms of their evolution, their impact on the inflicted economy and their links with financial, political and macroeconomic fundamentals. Limited-dependent variable models for ordered and unordered outcomes along with their heteroskedastic and random effects extensions are applied on a large panel of data comprising 40 years of monthly observations on 23 developed countries. Heterogeneity, complemented by indications of self-fulfilling expectations and noise, suggest that time and region specific predictive approaches and policy responses are more useful than trying to base analysis and policy decisions on more general patterns. Results are established with formal specification tests.

Keywords: Currency crises; speculative pressure; exchange rate; devaluation; Limited-dependent variable models. (search for similar items in EconPapers)
JEL-codes: C23 C25 E44 F31 G15 (search for similar items in EconPapers)
Date: 2004-12, Revised 2004-12
New Economics Papers: this item is included in nep-fin, nep-fmk, nep-ifn, nep-mac and nep-sea
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Citations: View citations in EconPapers (1)

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