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How Homogenous are Currency Crises? A Panel Study Using Multiple-Response Models

Tassos G. Anastasatos () and Ian R. Davidson
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Tassos G. Anastasatos: Bank of Greece and Business School, University of Loughborough
Ian R. Davidson: Business School, University of Loughborough

No 52, Working Papers from Bank of Greece

Abstract: This paper presents evidence that currency episodes display heterogeneity in terms of their evolution, their impact on the inflicted economy and their links with financial, political and macroeconomic fundamentals. Limited-dependent variable models for ordered and unordered outcomes along with their heteroskedastic and random effects extensions are applied to a large panel of data comprising 40 years of monthly observations on 23 developed countries. Heterogeneity, complemented by indications of self-fulfilling expectations and noise, suggest that time and region specific predictive approaches and policy responses are more useful than trying to base analysis and policy decisions on more general patterns. Results are established with formal specification tests.

Keywords: Money demand; Currency crises; speculative pressure; exchange rate; devaluation; Limited-dependent variable models (search for similar items in EconPapers)
JEL-codes: F31 C23 C25 E44 G15 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2006-12
New Economics Papers: this item is included in nep-ifn and nep-mac
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