Leading Indicators of Currency Crises

Graciela Kaminsky

No 1997/079, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the empirical evidence on currency crises and proposes a specific early warning system. This system involves monitoring the evolution of several indicators that tend to exhibit an unusual behavior in the periods preceding a crisis. When an indicator exceeds a certain threshold value, this is interpreted as a warning “signal” that a currency crisis may take place within the following 24 months. The variables that have the best track record within this approach include exports, deviations of the real exchange rate from trend, the ratio of broad money to gross international reserves, output, and equity prices.

Keywords: WP; break; procedure; crisis; GDP; currency; Currency Crises; Leading Indicators; Survey; banking crisis help; self-fulfilling crisis; money demand; price level; exchange rate band; money multiplier; looming crisis; short-term debt; shadow exchange rate; balance-of-payments crisis; nominal exchange rate; Real exchange rates; International reserves; Currency markets; Early warning systems (search for similar items in EconPapers)
Pages: 43
Date: 1997-07-01
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Citations: View citations in EconPapers (128)

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