TY - JOUR
T1 - An Early Warning System for Currency Crises in Emerging Countries
AU - Ferdous, Lutfa Tilat
AU - Kamal, Khnd Md Mostafa
AU - Ahsan, Amirul
AU - Hoang, Nhung Hong Thuy
AU - Samaduzzaman, Munshi
N1 - Copyright © 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).
PY - 2022/4/6
Y1 - 2022/4/6
N2 - In this study we develop an early warning system (EWS) to forecast currency crises in emerging countries in Asia and Latin America, using logit regression on monthly data from 1992 to 2011. We found that macroeconomic and institutional variables are valuable indicators for forecasting crises. Our results show that a low level of export growth, current account surplus/GDP, GDP growth, a high level of real exchange rate growth, import growth, and short-term debt/reserves can explain the advent of a possible currency crisis. We found that a poor law and order scenario and high external conflict can lead to a currency crisis. Additional findings include high government stability and the absence of internal conflict, which contribute to an absence of democracy, ultimately leading to a currency crisis. The policy-makers can consider taking the effective pre-emptive actions to prevent the currency crises occurring in the future.
AB - In this study we develop an early warning system (EWS) to forecast currency crises in emerging countries in Asia and Latin America, using logit regression on monthly data from 1992 to 2011. We found that macroeconomic and institutional variables are valuable indicators for forecasting crises. Our results show that a low level of export growth, current account surplus/GDP, GDP growth, a high level of real exchange rate growth, import growth, and short-term debt/reserves can explain the advent of a possible currency crisis. We found that a poor law and order scenario and high external conflict can lead to a currency crisis. Additional findings include high government stability and the absence of internal conflict, which contribute to an absence of democracy, ultimately leading to a currency crisis. The policy-makers can consider taking the effective pre-emptive actions to prevent the currency crises occurring in the future.
UR - https://www.mdpi.com/1911-8074/15/4/167
U2 - 10.3390/jrfm15040167
DO - 10.3390/jrfm15040167
M3 - Article
VL - 15
JO - Journal of Risk and Financial Management
JF - Journal of Risk and Financial Management
IS - 4
M1 - 167
ER -