Most of the literature has focused on measures of
currency crises. This can be defined either based on sufficiently large nominal and real movements in the exchange rate or on the basis of indices of currency
market pressure. Other crisis definitions considered include a drop in GDP and measures of capital account crises. As for the explanatory variables, a wide range has
been considered, covering external, financial, real, and
fiscal sectors, as well as institutional and political variables, and measures of contagion. Nonetheless, the
indicators found to be most frequently statistically significant in the literature are foreign exchange reserves,
the real exchange rate, the growth rate of credit, GDP
growth, and the current account to GDP balance. In
terms of the techniques that combine information from
these indicators to explain the prevalence of crises, most
of the approaches can be grouped into two broad categories: those that use a regression approach and those that
rely on nonparametric techniques.
Most of the literature has focused on measures ofcurrency crises. This can be defined either based on sufficiently large nominal and real movements in the exchange rate or on the basis of indices of currencymarket pressure. Other crisis definitions considered include a drop in GDP and measures of capital account crises. As for the explanatory variables, a wide range hasbeen considered, covering external, financial, real, andfiscal sectors, as well as institutional and political variables, and measures of contagion. Nonetheless, theindicators found to be most frequently statistically significant in the literature are foreign exchange reserves,the real exchange rate, the growth rate of credit, GDPgrowth, and the current account to GDP balance. Interms of the techniques that combine information fromthese indicators to explain the prevalence of crises, mostof the approaches can be grouped into two broad categories: those that use a regression approach and those thatrely on nonparametric techniques.
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