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Early warning systems for currency crises: The Turkish case

Ali Ari ()

Economic Systems, 2012, vol. 36, issue 3, 391-410

Abstract: Different severe financial crises episodes occurred in the Turkish economy in the last two decades. These crises led to severe economic and social consequences for Turkey in terms of increasing interest rates, large reserves losses, considerable currency depreciations, high output losses and high unemployment rates. This paper aims to illustrate the essential determinants of these crises by developing a multivariate logit model which estimates the predictive ability of sixteen economic and financial indicators in a sample that covers the period from January 1990 to December 2008. The empirical findings show that the Turkish crises are mainly due to excessive fiscal deficits, high money supply growths, sharp rises in short-term external debt, growing riskiness of the banking system (in particular currency and liquidity mismatches), and external adverse shocks.

Keywords: Currency crises; Crisis determinants; Crisis prediction; Turkey (search for similar items in EconPapers)
JEL-codes: C25 C53 G01 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:36:y:2012:i:3:p:391-410

DOI: 10.1016/j.ecosys.2012.07.001

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