Currency Crashes in Emerging Markets: Empirical Indicators

Jeffrey J. Frankel and Andrew K. Rose.
Authors registered in the RePEc Author Service: Jeffrey Alexander Frankel and Andrew Rose

No C96-062, Center for International and Development Economics Research (CIDER) Working Papers from University of California at Berkeley

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 nominal depreciation. We examine the composition of the debt as well as its level, and a variety of other macroeconomic factors, external and foreign. Crashes tend to occur when: output growth is low; the growth of domestic credit is high; and the level of foreign interest rates is high. A low ratio of FDI to debt is consistently associated with a high likelihood of a crash.

Date: 1996-01-01
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Working Paper: Currency Crashes in Emerging Markets: Empirical Indicators (1996)
Working Paper: Currency Crashes in Emerging Markets: Empirical Indicators (1996)
Working Paper: Currency Crashes in Emerging Markets: Empirical Indicators (1996)
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