Currency crashes in emerging markets: an empirical treatment

Jeffrey Frankel and Andrew Rose

No 534, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We use a panel of annual data for over one hundred developing countries from 1971 through 1992 to characterize currency crashes. We define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of the nominal depreciation. We examine the composition of the debt as well as its level, and a variety of other macroeconomic, external and foreign factors. Our factors are significantly related to crash incidence, especially output growth, the rate of change of domestic credit, and foreign interest rates. A low ratio of FDI to debt is consistently associated with a high likelihood of a crash.

Keywords: Money (search for similar items in EconPapers)
Date: 1996
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Journal Article: Currency crashes in emerging markets: An empirical treatment (1996)
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