Currency and Banking Crises: The Early Warnings of Distress
38 Pages Posted: 14 Feb 2006
Date Written: December 1999
The abruptness and virulence of the 1997 Asian crises have led many to claim that these crises are of a new breed and were thus unforecastable. This paper examines 102 financial crises in 20 countries and concludes that the Asian crises are not of a new variety. Overall, the 1997 Asian crises, as well as previous crises elsewhere, occur when economies are in distress, making the degree of fragility of the economy a useful indicator of future crises. Based on this idea, the paper proposes different composite leading indicators of crises, evaluated in terms of accuracy both in-sample and out-of-sample.
Keywords: Early Warnings, Currency Crises, Banking Crises
JEL Classification: F300, F410, F470
Suggested Citation: Suggested Citation