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Leading Indicators of Currency Crises

43 Pages Posted: 8 Dec 2016 Last revised: 9 Dec 2016

See all articles by Carmen Reinhart

Carmen Reinhart

Harvard University - Center for Business and Government; Centre for Economic Policy Research (CEPR); World Bank; University of Maryland - School of Public Affairs; National Bureau of Economic Research (NBER); International Monetary Fund (IMF); Peterson Institute for International Economics; Harvard University, Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA) ; Harvard University - Harvard Kennedy School (HKS)

Graciela Kaminsky

George Washington University - Department of Economics; National Bureau of Economic Research (NBER)

Saul Lizondo

Independent

Multiple version iconThere are 2 versions of this paper

Date Written: 1997

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: currency crises, banking crises, exchange rate overvaluation, early warnings

JEL Classification: E5, F3, F4, G01

Suggested Citation

Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Kaminsky, Graciela and Lizondo, Saul, Leading Indicators of Currency Crises (1997). Available at SSRN: https://ssrn.com/abstract=2882556 or http://dx.doi.org/10.2139/ssrn.2882556

Carmen Reinhart (Contact Author)

Harvard University - Center for Business and Government ( email )

John F. Kennedy School of Government
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Cambridge, MA 02138
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

World Bank ( email )

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University of Maryland - School of Public Affairs ( email )

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HOME PAGE: www.wam.umd.edu/~creinhar

National Bureau of Economic Research (NBER)

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International Monetary Fund (IMF) ( email )

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Harvard University, Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA) ( email )

79 JFK Street
Cambridge, MA 02138
United States
617-496-8643 (Phone)

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue NW
Washington, DC 20036
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Graciela Kaminsky

George Washington University - Department of Economics ( email )

Monroe Hall
2115 G Street, NW
Washington, DC 20052
United States
202-994-6686 (Phone)
202-994-6147 (Fax)

HOME PAGE: http://www.gracielakaminsky.com/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Saul Lizondo

Independent

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