Leading Indicators of Currency Crises: Are They the Same in Different Exchange Rate Regimes?

Yanping Zhao, Jakob Haan, Bert Scholtens and Haizhen Yang

Open Economies Review, 2014, vol. 25, issue 5, 937-957

Abstract: We investigate whether leading indicators of currency crises differ across exchange rate regimes using data for 88 countries in the period 1981–2010. Our estimates suggest that in fixed exchange rate regimes external indicators, such as deviations of the real exchange rate from trend and the growth of international reserves, have the strongest predictive power. In contrast, in floating exchange rate regimes monetary policy and credibility indicators, such as domestic credit growth and inflation, are the best leading indicators of currency crises. Both credibility and external economic indicators have predictive power in intermediate exchange rate regimes. Copyright Springer Science+Business Media New York 2014

Keywords: Leading indicators; Currency crises; Exchange rate regimes; F31; F37; E42 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s11079-014-9315-y

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