Currency Crises in Mexico 1990-2009: An Early Warning System Approach

Nonlinear Time Series and Finance. Universidad de Guadalajara. Eds. Semei Coronado-Ramírez, Pedro Celso-Arellano, Carlos O. Trejo-Pech (2014)

22 Pages Posted: 31 Dec 2016 Last revised: 10 Nov 2017

See all articles by Tjeerd M. Boonman

Tjeerd M. Boonman

Banco de Mexico - Financial Stability Division

Jan P. A. M. Jacobs

University of Groningen - Faculty of Economics and Business

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business

Date Written: March 1, 2014

Abstract

The Global Financial Crisis (GFC) has affected many countries including Mexico. The exchange rate depreciated sharply in the fall of 2008. This chapter investigates the experience of Mexico with currency crises since 1990. We estimate an Early Warning System, consisting of an ordered logit model to include the severity of currency crises, and a factor model to cope with the large number of crisis indicators. We find that Mexico’s currency crises are driven primarily by domestic economy, external economy and debt indicators. Ex ante forecasts for 2008-2009 do not produce a currency crisis in late 2008, in sharp contrast with reality.

Keywords: Currency crises, early warning systems, factor model, ordered logit model, Mexico

JEL Classification: C35, F31, G01

Suggested Citation

Boonman, Tjeerd M. and Jacobs, Jan P.A.M. and Kuper, Gerard H., Currency Crises in Mexico 1990-2009: An Early Warning System Approach (March 1, 2014). Nonlinear Time Series and Finance. Universidad de Guadalajara. Eds. Semei Coronado-Ramírez, Pedro Celso-Arellano, Carlos O. Trejo-Pech (2014). Available at SSRN: https://ssrn.com/abstract=2891085

Tjeerd M. Boonman (Contact Author)

Banco de Mexico - Financial Stability Division ( email )

Av. 5 de Mayo 18
Piso 4
Mexico City, 06059
Mexico
+52 55 5237 2000 ext 2047 (Phone)

Jan P.A.M. Jacobs

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

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