East Asian Financial Crisis of 1997 Revisited: Is it Possible to Devise an Early Warning System?

Mete Feridun ()
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Mete Feridun: Faculty of Economics and Administrative Sciences, Cyprus International University, Postal: Haspolat-Lefkoşa, Cyprus,, http://www.ciu.edu.tr/

Economia Internazionale / International Economics, 2006, vol. 59, issue 2, 161-173

Abstract: This study examines the causes of the East Asian financial crisis and presents an early warning system based on data from Malaysia, Indonesia, Thailand, Singapore, and Philippines during 1982:1–1998:1 through a panel probit regression model using 20 monthly macroeconomic and financial sector variables. Results indicate that the significant variables are current account/GDP , domestic credit/GDP , terms of trade, lending and deposit rate spread, and foreign direct investment/GDP . Evidence further suggests that the probability of the crisis increases with an increase in domestic credit/GDP , M1, imports, and foreign direct investment/GDP . The probability of the crisis increases with a decrease in exports, stock prices, terms of trade, current account, and lending and deposit rate spread. The model correctly indicates 64% of the crises and 77% of the tranquil periods even with a cut-off probability of 10%,

Keywords: Asian financial crisis; probit model; early warning systems (search for similar items in EconPapers)
JEL-codes: C51 O54 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:0083

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