Forecasting Currency Crises with Threshold Models

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

1 Scopus Citations
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Detail(s)

Original languageEnglish
Pages (from-to)156-174
Journal / PublicationInternational Economics
Volume156
Online published27 Feb 2018
Publication statusPublished - Dec 2018

Abstract

This paper develops a multi-factor threshold model to provide warning signals for currency crises. Using a panel data set for 16 economies over 20 years, it is found that the ratio of short-term external liabilities to reserves and the lending rate differential are valid threshold variables that can segregate “turbulent” from “tranquil” regime. The corresponding threshold estimates can provide useful pivotal points for governments to formulate regulatory policy measures to reduce the risk of financial crises.

Research Area(s)

  • Currency crisis, Multiple threshold variables, Panel data, Threshold model