Abstract

BOONMAN, Tjeerd M.; JACOBS, Jan P. A. M.  and  KUPER, Gerard H.. An Early Warning System for currency crises in Argentina and Brazil 1990-2009. EconoQuantum [online]. 2017, vol.14, n.2, pp.47-68. ISSN 2007-9869.  https://doi.org/10.18381/eq.v14i2.7100.

The Global Financial Crisis (GFC) has affected many regions including Latin America. This paper focuses on currency crises in Argentina and Brazil, the two largest economies in South America, and with a wide experience with currency crises. We estimate an Early Warning System, consisting of a static factor model and a multinomial ordered logit model, with monthly data for 1990-2007. Ex ante forecasts for 2008-2009 produce an increased probability of currency crises in the fall of 2008. Our model outcomes confirm that elements from earlier crises are useful to predict the currency crises during the GFC.

Keywords : Global financial crisis; currency crises; early warning systems; Latin America; static factor model; ordered logit model; C25; G01; N26.

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