Predicting Currency Crises: How Do Indicators Differ According to Crisis Definition?

Çankırı Karatekin University Journal of The Faculty of Economics and Administrative Sciences Y. 2016, Volume 6, Issue 2, pp. 85-102

20 Pages Posted: 3 May 2017 Last revised: 9 May 2017

See all articles by Dogus Emin

Dogus Emin

Social Sciences University of Ankara

Ayşegül Aytaç

Economic Policy Research Foundation of Turkey (TEPAV)

Date Written: 2016

Abstract

The focus of this paper is currency crisis, particularly the evaluation of the models that attempt to forecast currency crisis. Here, the aim is to investigate the impacts of definition differences on Early Warning Systems. In order to show that significances of the crisis indicators are dependent to crisis definitions of the models, the significant variables for the models that are constructed with the depreciation based definition of Reinhart and Rogoff (2009) and Exchange Market Pressure Index based definition of Eichengreen et al. (1996) are separately identified. The results of the estimations of the models that are constructed with these different approaches have shown that, different definition methods identify different sets of variables as crisis indicators.

Keywords: Currency Crisis, Early Warning System, Probability Threshold, Crisis Prediction

JEL Classification: E47, E60, F31, F37

Suggested Citation

Emin, Dogus and Aytaç, Ayşegül, Predicting Currency Crises: How Do Indicators Differ According to Crisis Definition? (2016). Çankırı Karatekin University Journal of The Faculty of Economics and Administrative Sciences Y. 2016, Volume 6, Issue 2, pp. 85-102 . Available at SSRN: https://ssrn.com/abstract=2959346

Dogus Emin (Contact Author)

Social Sciences University of Ankara ( email )

Turkey

Ayşegül Aytaç

Economic Policy Research Foundation of Turkey (TEPAV) ( email )

Söğütözü Cad. No. 43
TOBB-ETÜ Yerleşkesi 2.
Söğütözü, Ankara 06560
Turkey

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