Journal of International Money and Finance Volume 18 issue 4 1999 doi 10.1016_s0261560699000248 Andrew Berg; Catherine Pattillo Predicting currency crises The indicators ..6文档.pdf

Journal of International Money and Finance 18 (1999) 561–586 /locate/jimonfin Predicting currency crises: The indicators approach and an alternative Andrew Berg, Catherine Pattillo* Research Department, International Monetary Fund, 700 19th St. N.W., Washington D.C., 20431, USA Abstract In recent years, a number of researchers have claimed success in systematically predicting which countries are more likely to suffer currency crises, most notably Kaminsky, Lizondo and Reinhart (1998). This paper evaluates the KLR approach to anticipating currency crises and develops and tests an alternative. First, we try to answer the question: if we had been using the KLR model in late 1996, how well armed would we have been to predict the Asia crisis? Second, we analyze a more general probit-based model of predicting currency crises. In the process, we test several basic assumptions underlying the indicators approach.  1999 Elsevier Science Ltd. All rights reserved. JEL classification : F31, F47. Keywords: Currency crises; Vulnerability indicators; Asian crisis; Balance of payments crises; Crisis pre- diction 1. Introduction In recent years, a number of researchers have claimed success in systematically predicting which countries are more likely to suffer currency crises. Perhaps the most prominent model proposed before 1997 for predicting currency crises is the indicators approach of Kaminsky et al. (1998) (hereafter KLR), who monitor a large set of monthly indicators that signal a crisis whenever they cross a certain threshold. The * Corresponding author. E-mail: cpattillo@ 0261-5606/99/$ - see front matter  1999 Elsevier Science Ltd. All rights reserved. PII: S 02 61 - 5606( 99 )0 0024-8 562 A.