A Perspective on Predicting Currency Crises

29 Pages Posted: 1 Feb 2011

See all articles by Juan F. Yépez

Juan F. Yépez

International Monetary Fund (IMF)

Robert P. Flood

International Monetary Fund (IMF) - Research Department; CENTRUM Business School; National Bureau of Economic Research (NBER)

Nancy Peregrim Marion

Dartmouth College - Department of Economics

Date Written: October 2010

Abstract

Currency crises are difficult to predict. It could be that we are choosing the wrong variables or using the wrong models or adopting measurement techniques not up to the task. We set up a Monte Carlo experiment designed to evaluate the measurement techniques. In our study, the methods are given the right fundamentals and the right models and are evaluated on how closely the estimated predictions match the objectively correct predictions. We find that all methods do reasonably well when fundamentals are explosive and all do badly when fundamentals are merely highly volatile.

Keywords: Currencies, Devaluation, Economic forecasting, Financial crisis, Forecasting models

Suggested Citation

Yépez, Juan F. and Flood, Robert P. and Marion, Nancy P., A Perspective on Predicting Currency Crises (October 2010). IMF Working Paper No. 10/227, Available at SSRN: https://ssrn.com/abstract=1750715

Juan F. Yépez (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Robert P. Flood

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7667 (Phone)
202-623-6339 (Fax)

CENTRUM Business School

Daniel Alomía Robles s/n
Los Alamos de Monterrico
Surco, Lima, Lima 00001
Peru

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nancy P. Marion

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States
(603) 646-2511 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
76
Abstract Views
1,103
rank
345,426
PlumX Metrics