The Contribution of Domestic and External Factors to Emerging Market Devaluation Crises: An Early Warning Systems Approach
- Topics:
- Investment and Capital Markets
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Overview: This paper, a modified "early warning system" (EWS) approach is developed to identify the roles of domestic and external factors in emerging market crises. Several probit models of financial crises were estimated for 26 emerging market countries. These models were used to identify the separate contributions to the probabilities of crisis of domestic and external variables. The study finds that, relative to domestic factors, adverse external shocks and large external imbalances contributed little to the average estimated probability of crisis in emerging market countries, but accounted for much more of the spikes in the probability of crisis estimated to occur during actual crisis years.
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Format: PDF | Size: 210KB | Date: Aug 2001 | Pages: 56
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