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The early warnings of balance-of-payments problems: Kaminsky and Reinhart revisited

Michael Lang

No 205, Frankfurt School - Working Paper Series from Frankfurt School of Finance and Management

Abstract: This paper builds upon the model of Kaminsky and Reinhart (1999) and extends it to triplecrises. It applies a new visualisation approach combining elements of an event study analysis and a fan chart technique. This approach illustrates the deviation of fundamentals in the runup to balance-of-payments problems. The results suggest that both systemic banking crises and deteriorating government finances are highly significant leading indicators. Taking these indicators into account helps build a new early warning system for currency crises. The results are highly significant and robust. The out-of-sample forecasts demonstrate the strong predictive power of the model.

Keywords: currency crisis; financial sector vulnerability; early warning system (search for similar items in EconPapers)
JEL-codes: F30 F31 F34 F41 G01 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cba, nep-for and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fsfmwp:205

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