Anticipating Balance of Payments Crises--The Role of Early Warning Systems

Catherine Pattillo, Andrew Berg (), Gian Maria Milesi-Ferretti () and Eduardo Borensztein

No 2000/004, IMF Occasional Papers from International Monetary Fund

Abstract: Recent years have witnessed an increase in the frequency of currency and balance of payments crises in developing countries. More important, the crises have become more virulent, have caused widespread disruption to other developing countries, and have even had repercussions on advanced economies. To predict crises, their causes must be clearly understood. Two competing strands of theories are reviewed in this paper. The first focuses on the consequences of such policies as excessive credit growth in provoking depletion of foreign exchange reserves and making a devaluation enevitable. The second emphasizes the trade-offs between internal and external balance that the policymaker faces in defending a peg.

Keywords: OP; crisis; balance of payments crisis; economy; early warning system framework; probability of crisis; section IV; timing of crisis; approaching crisis; Early warning systems; Currency crises; Currencies; Real exchange rates; Global; Africa (search for similar items in EconPapers)
Pages: 39
Date: 2000-01-24
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Citations: View citations in EconPapers (23)

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