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Are Currency Crises Predictable? A Test
Author: Ms. Catherine A Pattillo and Mr. Andrew Berg
Series:
IMF Working Papers
Volume/Issue:
Volume 1998: Issue 154
Language:
English
Publication Date:
01 Nov 1998
DOI:
https://doi.org/10.5089/9781451857207.001
ISBN:
9781451857207
ISSN:
1018-5941
Pages:
61
Keywords:
WP; probability of crisis; KLR crisis date; crisis index; currency crisis; Currency crises; vulnerability indicators; Asian crisis; balance of payments crises; crisis prediction; crisis countries Thailand; crisis probability; crisis date; Real exchange rates; Early warning systems; Probit models; Current account; Global; Asia and Pacific; Africa
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper evaluates three models for predicting currency crises that were proposed before 1997. The idea is to answer the question: if we had been using these models in late 1996, how well armed would we have been to predict the Asian crisis? The results are mixed but somewhat encouraging. One model, and our modifications to it, provide useful forecasts, at least compared with a naive benchmark. The head-to-head comparison also sheds light on the economics of currency crises, the nature of the Asian crisis, and issues in the empirical modeling of currency crises.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund