Currency Crashes in Emerging Markets: Empirical Indicators

Jeffrey Alexander Frankel () and Andrew Rose ()

No 1349, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use a panel of annual data for over one hundred developing countries from 1971–92 to characterize currency crashes. We define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation. We examine the composition of the debt as well as its level, and a variety of other macroeconomic factors, external and foreign. Crashes tend to occur when: output growth is low; the growth of domestic credit is high; and the level of foreign interest rates is high. A low ratio of foreign direct investment to debt is consistently associated with a high likelihood of a crash.

Keywords: Composition; Data; Debt; Developing; Exchange Rate; Macroeconomic; Panel (search for similar items in EconPapers)
JEL-codes: F32 F34 (search for similar items in EconPapers)
Date: 1996-02
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Related works:
Working Paper: Currency Crashes in Emerging Markets: Empirical Indicators (1996)
Working Paper: Currency Crashes in Emerging Markets: Empirical Indicators (1996)
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