International Finance Discussion Papers (IFDP)
October 1998
Currency and Banking Crisis: The Early Warnings of Distress
Graciela L. Kaminsky
Abstract:
The abruptness and virulence of the 1997 Asian crises have led many to claim that these crises are of a new breed and thus they were 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 in other regions, occur when the 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, which are evaluated in terms of accuracy both in-sample and out-of-sample.
Keywords: Banking and currency crises, early warnings, predicting crises
PDF: Full Paper
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