Forecasting currency crises with threshold models
Terence Tai Leung Chong () and
Isabel K. Yan
International Economics, 2018, issue 156, 156-174
This paper develops a multi-factor threshold model to provide warning signals for currency crises. Using a panel data set for 16 economies over 20 years, it is found that the ratio of short-term external liabilities to reserves and the lending rate differential are valid threshold variables that can segregate “turbulent” from “tranquil” regime. The corresponding threshold estimates can provide useful pivotal points for governments to formulate regulatory policy measures to reduce the risk of financial crises.
Keywords: Threshold model; Multiple threshold variables; Currency crisis; Panel data (search for similar items in EconPapers)
JEL-codes: C12 C13 C33 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepiie:2018-q4-156-12
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