Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71959
Authors: 
Crespo Cuaresma, Jesus
Slacik, Tomas
Year of Publication: 
2008
Series/Report no.: 
Working Papers in Economics and Statistics 2008-03
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.
Subjects: 
currency crisis
Bayesian model averaging
JEL: 
F31
F34
E43
Document Type: 
Working Paper

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