Identification of Currency Crises in Emerging Economies: A Combined Approach

87 Pages Posted: 11 Sep 2017

See all articles by Tjeerd M. Boonman

Tjeerd M. Boonman

Banco de Mexico - Financial Stability Division

Date Written: September 1, 2017

Abstract

The first step for empirical studying currency crises is to identify or date these crises. This is not an easy task – not even the conceptual definition is agreed upon, let alone an operational definition. The choice of a definition has an impact on the identification of crises, and may even provide an explanation to the mixed performance of early warning systems for currency crises. In empirical studies typically a single definition is adopted and the crisis dates are compared to the narrative to determine a set of currency crisis dates. We present a novel way to identify currency crises. We employ combinations of definitions, which provide a wider base than using a single definition. Through combining we can overcome setbacks of the individual definitions. We date currency crises in 35 emerging economies for the period 1990 to 2016, in a monthly frequency. We compare our dataset with the narrative, expert opinions and other studies, and find that a combination of several definitions fits the narrative better than any single crisis definition. We include the narrative in the appendix, which makes this work more transparent and useful for other investigators.

Keywords: Currency Crises, Emerging Economies, Foreign Exchange Rates

JEL Classification: G01, F31

Suggested Citation

Boonman, Tjeerd M., Identification of Currency Crises in Emerging Economies: A Combined Approach (September 1, 2017). Available at SSRN: https://ssrn.com/abstract=3033358 or http://dx.doi.org/10.2139/ssrn.3033358

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)

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