Leading Indicators of Currency Crises

Kaminsky, Graciela; Lizondo, Saul; Reinhart, Carmen

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Leading Indicators of Currency Crises

IMF Working Paper No. 97/79

43 Pages Posted: 15 Feb 2006

See all articles by Graciela Kaminsky

Graciela Kaminsky

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

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)

There are 2 versions of this paper

Date Written: July 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, Leading Indicators, Survey

JEL Classification: F31, F47

Suggested Citation: Suggested Citation

Kaminsky, Graciela and Lizondo, Saul and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen, Leading Indicators of Currency Crises (July 1997). IMF Working Paper No. 97/79, Available at SSRN: https://ssrn.com/abstract=882365