Currency crisis early warning systems: Why they should be dynamic

Candelon, Bertrand; Dumitrescu, Elena-Ivona; Hurlin, Christophe

doi:10.1016/j.ijforecast.2014.03.015

Cited by 73 publications

(69 citation statements)

References 21 publications

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“…In this sense, determination of an optimal cut-off value is crucial since this value discriminates crisis period from calm periods. (Candelon et al, 2013). Thus, using the most appropriate threshold level for a specific Early Warning System model is crucial for the success rate of the model.…”

Section: The Limited Dependent Regression Approachmentioning

confidence: 99%

The challenge of predicting currency crises: how do definition and probability threshold choice make a difference?

Emin

Aytaç²

2016

Eurasian Econ Rev

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Section: The Limited Dependent Regression Approachmentioning

confidence: 99%

The challenge of predicting currency crises: how do definition and probability threshold choice make a difference?

Emin

Aytaç²

2016

Eurasian Econ Rev

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“…RR (2011) used univariate and bivariate-logit models while Candelon et al (2010) and Candelon et al (2013) focused their results on multivariate probit models. We show in Section 4 that our results are robust to using logit and probit models and of different dimensions (univariate and multivariate models).…”

Section: Definition Of Variables Used In the Empirical Analysismentioning

confidence: 99%

“…Kaminsky et al (1998) showed that it is possible to find a large number of explanatory variables that may signal the occurrence of a crisis. However, more recently, Candelon et al (2010) and Candelon, Dumitrescu, Hurlin and Palm (2013) showed that univariate and multivariate dynamic probit models present the advantage of yielding plausible results while being fairly parsimoniously parametrized. They found relationships of three types of financial crisis (banking, currency and sovereign debt crisis), but they focused their analysis only from 1985 onwards.…”

Section: Introductionmentioning

confidence: 99%

Banking, Currency, Stock Market and Debt Crises: Revisiting Reinhart & Rogoff Debt Analysis in Spain, 1850-1995

Maixé-Altés

Iglesias

2015

SSRN Journal

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What type of crisis is generated when debt increases? We study the Spanish debt evolution in the 19th and 20th centuries by introducing currency and stock-market crises in the Reinhart and Rogoff (2011) framework. We find their same results for the determinants of banking and debt crises but substituting external and public debt with perpetual debt. Moreover, we find that currency crises depend strongly and positively on financial centers crises and negatively and mildly on perpetual debt. We justify the negative relationship due to an inflation tax. We also find that stock-market crises depend only positively and strongly on financial centers crises.

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“…First, we use the exchange rate (ER) pressure index as a proxy for export demand and foreign capital flows shocks. The ER pressure index has been widely used in international finance literature (see Berg / Patillo 1999;Candelon / Dumitrescu / Hurlin 2010;Kaminsky / Lizondo / Reinhart 1998;Sachs / Tornel / Velasco 1996). It is generally defined as a weighted average of percentage changes of policy variables in response to current account or financial account shocks.…”

Section: Introducing Shocksmentioning

confidence: 99%

Assessing the tax systems' risk and efficiency in Russian regions at different levels of the budget system

Малкина¹,

Balakin²

2017

RETP

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− For the whole sample of lower-income countries, ER pressure has a significant negative effect on trade and income tax. In contrast, its effect is negative yet not significant on indirect taxes (goods and services tax), and practically zero on non-tax revenue. The effect is particularly strong and significant in non-democratic as well as in non-resource-rich countries. Apparently, these groups experience more difficulties in counteracting the impact of ER pressure shocks. − Terms-of-trade shocks have significant negative effects on non-tax revenue. The reason is perhaps that these shocks are likely to reduce profits of public enterprises that act as commodity exporters. The effect is negative and significant for all sub-groups except democracies, but stronger for non-resource-rich compared to resource-rich countries. Terms-of-trade shocks also affect income tax revenue in non-democratic and non-resource-rich countries. − Natural disaster intensity affects mostly trade and income taxes, although the coefficient is not significant in any specification.All in all it can be inferred that non-democratic and non-resource-rich countries are particularly vulnerable to shocks affecting income taxes and non-tax revenue. In the case of resource-rich countries, no clear patterns emerge: their revenue structure, though more volatile than that of non-resource-rich countries due to a higher dependence on non-tax revenue, could be less vulnerable to external shocks. At least, there is no robust evidence pointing to volatility of revenue from natural resources being directly connected to increased vulnerability vis-à-vis shocks analysed in this report. This finding Study on the vulnerability and resilience factors of tax revenues in developing countriesFinal Report AETS Consortium -November 2013 4is somewhat unexpected, as conventional wisdom and the literature on rent incomes from (principally) oil would suggest resource-rich economies to be particularly vulnerable to global price and capital shocks. From the present study we get the impression that it is much more the non-resource-rich countries we should be worried about.The findings indicate that vulnerability to shocks should not be regarded exclusively as an issue of major adverse events hitting an economy. It may be important for governments, donors and international organisations to prepare for such events and to develop the appropriate financial tools to deal with them. But it is also important to keep in mind that minor events also have significant effects on revenue and that long-term structural reforms (in particular regarding income tax and non-tax revenue) are a necessary ingredient of any strategy targeting vulnerability of revenue in developing countries. In this context, a broad tax portfolio could contribute to making total revenue less susceptible to individual shocks. Further, the better performance of democracies suggests that reforms pointing to accountability, transparency and rule of law could have an important positive effect on revenue resilience, as g...

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Currency crisis early warning systems: Why they should be dynamic

Cited by 73 publications

References 21 publications

The challenge of predicting currency crises: how do definition and probability threshold choice make a difference?

The challenge of predicting currency crises: how do definition and probability threshold choice make a difference?

Banking, Currency, Stock Market and Debt Crises: Revisiting Reinhart & Rogoff Debt Analysis in Spain, 1850-1995

Assessing the tax systems' risk and efficiency in Russian regions at different levels of the budget system

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