scholarly journals Are Emerging Market Currency Crises Predictable? - a Test

2006 ◽  
Author(s):  
Tuomas A. Peltonen
Keyword(s):  
Currency Crises ◽  
Emerging Market

Most Speculative Attacks Do Not Succeed: Currency Crises and Currency Crashes

2018 ◽  
Vol 09 (01n02) ◽  
pp. 1850001 ◽  
Author(s):  
Hassan Almahmood ◽  
Munif Al Munyif ◽  
Thomas D. Willett
Keyword(s):  
Exchange Rates ◽  
Interest Rates ◽  
Currency Crises ◽  
Emerging Market ◽  
Exchange Market ◽  
Speculative Attacks ◽  
Considerable Research ◽  
Different Types ◽  
Almost All ◽  
Market Pressure

While there has been considerable research on currency crises, relatively little attention has been given to whether they are successful or not. We investigate this question for a set of 32 emerging market economies for the period 1980–2014. In the literature, many different measures of currency crises have been used, but almost all use some variants of exchange market pressure indices that look at changes in exchange rates, international reserves, and often also interest rates. These vary mainly in their specific specifications such as how to weigh the different variables. Therefore, to check the robustness of our results we use six different specifications. A second type of measure is also sometimes used. These focus only on large depreciations of exchange rates. While often called measures of currency crises they are really only measures of currency crashes. We thus take this approach as a measure of successful attacks. Using a wider range of thresholds than studies such as Lavean and Valencia’s, a well-known dataset of different types of financial crises, we still find that the vast majority of speculative attacks are not successful.

scholarly journals Credits, Crises, and Capital Controls: A Microeconomic Analysis

2002 ◽  
Vol 1 (1) ◽  
Author(s):  
Zvika Neeman ◽  
Gerhard Oskar Orosel
Keyword(s):  
Foreign Investment ◽  
Currency Crises ◽  
Emerging Market ◽  
Currency Crisis ◽  
Capital Controls ◽  
Foreign Banks ◽  
Economic Risk ◽  
Its Analysis ◽  
Microeconomic Analysis ◽  
Project Risks

Abstract We analyze the behavior of foreign banks who sequentially provide credit to finance projects in an emerging market. The foreign banks are exposed to both project-risks and the macro-economic risk of a currency crisis, and there are no bailout guarantees. Nevertheless, we show that it is often the case that banks provide too much credit too easily and that this behavior may precipitate the onset of a currency crisis. We demonstrate how the imposition of capital controls in the form of taxes and subsidies on foreign investment may improve the situation. Whereas most of the literature on currency crises focuses its analysis on debtor countries and thus on the borrowers' side, our paper illustrates that the lenders' side also deserves attention.

The Role of Financial Derivative Instruments in the Emerging Market Financial Crises of the Late 1990s: The Mexican Case

2014 ◽  
Vol 30 (2) ◽  
pp. 479-521
Author(s):  
Ayca Sarialioglu Hayali
Keyword(s):  
Adverse Effects ◽  
Emerging Markets ◽  
Exchange Rates ◽  
Financial Crises ◽  
Currency Crises ◽  
Emerging Market ◽  
Financial Derivatives ◽  
Derivative Instruments ◽  
Financial Derivative

Although derivatives were developed for the treatment of some diseases, such as risks and volatilities, ironically, as experienced in the 1990s, they, themselves, created them as sometimes “adverse effects” of hedging or with deliberately harmful purposes of speculation. This paper aims to analyze the role of financial derivatives in the emerging markets financial crises of the 1990s. In this regard, it deals with the Mexican case through a VAR-GARCH approach. The paper found that financial derivatives had an increasing impact on the currency crises of Mexico. This was an immediate destabilizing effect on the volatility of the spot exchange rates. Si bien los derivados fueron desarrollados para tratar ciertas enfermedades como los riesgos y la volatilidad, irónicamente, como se vivió en la década de 1990, ellos mismos crearon en ocasiones esos problemas como “efectos secundarios” de la cobertura, o bien, con intenciones deliberadamente dañinas de especulación. Este artículo busca analizar el rol de los derivados financieros en las crisis de los noventa dentro de los mercados emergentes. Así pues, se trata el caso mexicano mediante un enfoque VaR-GARCH. El artículo encuentra que los derivados financieros tuvieron un impacto creciente en las crisis monetarias de México. Éste fue un efecto desestabilizador inmediato sobre la volatilidad de las tasas de cambio al contado.

scholarly journals Output Losses from Currency Crises and the Role of Central Bank

2021 ◽  
Vol 10 (3) ◽  
pp. 79-97
Author(s):  
Mahdi Yazdani ◽  
Mohammad Nikzad
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Currency Crises ◽  
Emerging Market ◽  
Negative Effects ◽  
Foreign Reserves ◽  
Positive Effects ◽  
Emerging Market Countries ◽  
Output Losses

Abstract Generally, one of the important issues related to currency crises is the output losses caused by these phenomena. In this study, determinants of output losses and particularly the role of the central bank will be evaluated during currency crises. Moreover, the paper tries to investigate the roles of macroeconomic variables and also monetary, fiscal and exchange rate policies on the output losses during currency crises. In this regard, an econometric model with panel data has been used for emerging market countries during 1980-2016. The results show that currency crises accruing have a positive and significant effect on output losses. While the successful defence of central bank has had the negative effects on the output losses, but it is positive for the unsuccessful defence and the non-intervention or immediate depreciation. However, the role of the macroeconomic condition is important where total foreign reserves can be considered as a buffer against the output losses, while inflation and deviation of the real exchange rate from its trend have had positive effects on the output losses. Finally, the output losses can be reduced by an active monetary, fiscal and exchange rate policies.

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