On the determinants of currency crises: The role of model uncertainty

Crespo Cuaresma J & Slacik T (2009). On the determinants of currency crises: The role of model uncertainty. Journal of Macroeconomics 31 (4): 621-632. DOI:10.1016/j.jmacro.2009.01.004.

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Abstract

We tackle explicitly the issue of model uncertainty in the framework of binary variable models of currency crises. Using Bayesian model averaging techniques, we assess the robustness of the explanatory variables proposed in the recent literature for both static and dynamic models. Our results indicate that the variables belonging to the set of macroeconomic fundamentals proposed by the literature are very fragile determinants of the occurrence of currency crises. The results improve if the crisis index identifies a crisis period (defined as the period up to a year before a crisis) instead of a crisis occurrence. In this setting, the extent of real exchange rate misalignment and financial market indicators appear as robust determinants of crisis periods.

Item Type: Article
Uncontrolled Keywords: Currency crisis; Bayesian model averaging
Research Programs: World Population (POP)
Bibliographic Reference: Journal of Macroeconomics; 31(4):621-632 (December 2009)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:42
Last Modified: 24 Feb 2016 14:46
URI: http://pure.iiasa.ac.at/8880

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