An almost‐too‐late warning mechanism for currency crises1

Jesus Crespo Cuaresma and Tomas Slacik

The Economics of Transition, 2010, vol. 18, issue 1, 123-141

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.

Date: 2010
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https://doi.org/10.1111/j.1468-0351.2009.00369.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:etrans:v:18:y:2010:i:1:p:123-141

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