Currency Crashes in Emerging Markets: Empirical Indicators, Issue 5437
National Bureau of Economic Research, 1996 - Debts, External - 29 pages
We use a panel of annual data for over one hundred developing countries from 1971 through 1992 to characterize currency crashes. We define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation. We examine the composition of the debt as well as its level, and a variety of other macroeconomic factors, external and foreign. Crashes tend to occur when: output growth is low; the growth of domestic credit is high; and the level of foreign interest rates is high. A low ratio of FDI to debt is consistently associated with a high likelihood of a crash
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associated z-statistics Bureau of Economic capital inflows Comm'l Bank/Debt commercial bank concessional crash incidence crashing countries currency crashes currency exposure current account Data mnemonic DT debt composition variables Debt Denominated DECT deficit define a currency depreciation developing countries domestic credit growth domestic macroeconomic DT DOD DECT Economic Research Effects=0 Equatorial Guinea external variables factors Foreign Direct Investment foreign interest rates foreign variables fractions of debt Frankel Gov't Budget government budget graphical Guinea-Bissau Guyana high domestic credit international reserves IR/PS Stacks Jeffrey macroeconomic maximum likelihood mnemonic BN KLT mnemonic DT DOD Model estimated Multilateral/Debt National Bureau NBER NBER Working Papers Northern Growth northern interest rates over-valuation P-Val percentage of GDP portfolio Predicted Crash probit models public sector Public Sector/Debt rate of real ratio real exchange rate real output regressors reserves to monthly Sample Size 803 Slopes=0 Somalia speculative attacks U.S. dollar World Data mnemonic Zaire Zambia Zimbabwe