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Title:Early warning systems of financial crises: implementation of a currency crisis model for Uganda PDF Logo
Authors:Heun, Michael
Schlink, Torsten
Issue Date:2004
Series/Report no.:Working paper series // Frankfurt School of Finance & Management 59
Abstract:The objective of this paper is to implement a prototype of a currency crisis model as part of an early warning system framework for Uganda. The financial systems of developing countries like Uganda are especially vulnerable and therefore robust instruments to predict crises are needed. Our model is based on the signals approach developed by Kaminsky, Lizondo and Reinhart (1998) and Kaminsky and Reinhart (1999). The basic idea of the signals approach is to monitor several indicators that tend to exhibit an unusual behaviour in the periods preceding a crisis. When an indicator crosses a threshold, then it is said to issue a signal that a currency crisis may occur within a given period. We implemented this signals approach for Uganda. One of the main challenges in this connection is that Uganda during the analyzed periods had no currency crisis. Therefore, we modified the model in a way that it estimates some of the performance measures based on empirical studies to obtain usable results. The outcomes of our calculations performed well and were economically validated.
Subjects:Currency crises
Uganda
early warning systems
balance of payment crises
crisis prediction
vulnerability indicators
signals approach
JEL:F31
F47
Persistent Identifier of the first edition:urn:nbn:de:101:1-2008082577
Document Type:Working Paper
Appears in Collections:Frankfurt School - Working Paper Series, Frankfurt School of Finance and Management

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