Currency Crises: Is Central America Different?

Gerardo Esquivel () and Felipe B. Larrain
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Felipe B. Larrain: Harvard University

No 566, Econometric Society World Congress 2000 Contributed Papers from Econometric Society

Abstract: In a recent paper we analyzed the determinants of currency crises in a sample of 30 high and middle income countries (Esquivel and Larrain, 1998). In this work we focus on Central America and analyze whether the determinants of currency crises in this region are different from those identified in our previous work. We conclude that they are not, and show that a small set of macroeconomic variables helps to explain the currency crises that took place in Central America between 1976 and 1996. The results of tests applied here support the empirical approach that attempts to explain currency crises by focusing on the behavior of a few macroeconomic indicators. Part of the interest of this result stems from the fact that the Central American countries had an exchange rate system markedly different from that prevailing in the economies that are usually analyzed in similar studies.

Date: 2000-08-01
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Working Paper: Currency Crises: Is Central America Different? (1999)
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