Assessing Financial Vulnerability: An Early Warning System for Emerging Markets [NOOK Book]

Overview

The European currency crises of 1992-93, the Mexican crisis of 1994-95, and especially the Asian/global crisis of 1997-98, have all contributed to a heightened interest in the early warning signals of financial crises. This pathbreaking study presents a comprehensive battery of empirical tests on the performance of alternative early warning indicators for emerging-market economies that should prove useful in the construction of a more effective global warning system.

Not only ...

See more details below
Assessing Financial Vulnerability: An Early Warning System for Emerging Markets

Available on NOOK devices and apps  
  • NOOK Devices
  • NOOK HD/HD+ Tablet
  • NOOK
  • NOOK Color
  • NOOK Tablet
  • Tablet/Phone
  • NOOK for Windows 8 Tablet
  • NOOK for iOS
  • NOOK for Android
  • NOOK Kids for iPad
  • PC/Mac
  • NOOK for Windows 8
  • NOOK for PC
  • NOOK for Mac
  • NOOK Study
  • NOOK for Web

Want a NOOK? Explore Now

NOOK Book (eBook)
$11.99
BN.com price
(Save 40%)$20.00 List Price

Overview

The European currency crises of 1992-93, the Mexican crisis of 1994-95, and especially the Asian/global crisis of 1997-98, have all contributed to a heightened interest in the early warning signals of financial crises. This pathbreaking study presents a comprehensive battery of empirical tests on the performance of alternative early warning indicators for emerging-market economies that should prove useful in the construction of a more effective global warning system.

Not only are the authors able to draw conclusions about which specific indicators have sent the most reliable early warning signals of currency and banking crises in emerging economies, they also test the out-of-sample performance of the model during the Asian crisis and find that it does a good job of identifying the most vulnerable economies. In addition, they show how the early warning system can be used to construct a "composite" crisis indicator to weigh the importance of alternative channels of cross-country "contagion" of crises, and to generate information about the recovery path from crises.

This timely study comes on the eve of impending changes at the International Monetary Fund as that institution reexamines how it reacts to financial crises. Moreover, the study provides "... a wealth of valuable elements for anyone investigating and forecasting adverse developments in emerging markets as well as industrial countries," according to Ewoud Schuitemaker, vice president of the economics department at ABN AMRO Bank.

Read More Show Less

What People Are Saying

Barry Eichengreen
Barry Eichengreen, University of California, Berkeley:

. . . the best available effort to build an 'early warning system'.

Holger Wolf
Holger Wolf, Georgetown University:

. . . a well-written and innovative treatment of an important topic and should be of great interest to both practitioners and academics.

Peter Montiel
Peter Montiel, International Monetary Fund:

(Provides) a definitive presentation of the 'early warning indicator' methodology for crisis prediction . . .Without a doubt, this is a book that I would want to have on my shelves.

Read More Show Less

Product Details

  • ISBN-13: 9780881323047
  • Publisher: Peterson Institute for International Economics
  • Publication date: 6/1/2000
  • Sold by: Barnes & Noble
  • Format: eBook
  • File size: 2 MB

Table of Contents

Preface ix
Acknowledgments xv
1 Introduction 1
Organization of the book 9
2 Methodology 11
General Guidelines 11
Putting the Signals Approach to Work 18
3 Empirical Results 33
The Monthly Indicators: Robustness Check 33
The Annual Indicators: What Works? 38
Do the Indicators Flash Early Enough? 40
Microeconomic Indicators: Selective Evidence 42
4 Rating the Rating Agencies 45
Do Sovereign Credit Ratings Predict Crises? 45
Why Do Credit Ratings Fail to Anticipate Crises? 49
Do Financial Markets Anticipate Crises? 52
5 An Assessment of Vulnerability: Out-of-Sample Results 55
Vulnerability and Signals 56
A Composite Indicator and Crises Probabilities 64
6 Contagion 73
Defining Contagion 74
Theories of Contagion and Their Implications 75
Empirical Studies 76
Trade and Financial Clusters and a Composite Contagion Index 77
What the Index Reveals about Three Recent Crisis Episodes 79
7 The Aftermath of Crises 85
The Recovery Process 85
Some Caveats 89
8 Summary of Results and Concluding Remarks 95
Summary of Findings 95
Would the Publication of the Indicators Erode Their Early Warning Role? 109
Do the Better Performing Indicators Carry Policy Implications? 110
Appendix A Data and Definitions 111
References 115
Index 121
Tables
Table 1.1 Emerging Asia: real GDP growth forecasts, 1996-98 3
Table 1.2 Rating agencies' performance before the Asian crisis: Moody's and Standard & Poor's long-term debt ratings, 1996-97 4
Table 2.1 Currency crisis starting dates 22
Table 2.2 Banking crisis starting dates 24
Table 2.3 Selected leading indicators of banking and currency crises 26
Table 2.4 Optimal thresholds 29
Table 2.5 Examples of country-specific thresholds: currency crises 30
Table 3.1 Ranking the monthly indicators: banking crises 34
Table 3.2 Ranking the monthly indicators: currency crises 35
Table 3.3 Annual indicators: banking crises 38
Table 3.4 Annual indicators: currency crises 39
Table 3.5 Short-term debt: selected countries, June 1997 40
Table 3.6 How leading are the signals? 41
Table 3.7 Microeconomic indicators: banking crises 42
Table 4.1 Comparison of Institutional Investor sovereign ratings with indicators of economic fundamentals 46
Table 4.2 Do ratings predict banking crises? 48
Table 4.3 Do ratings predict currency crises? 48
Table 4.4 Do ratings predict banking crises for emerging markets? 50
Table 4.5 Do ratings predict currency crises for emerging markets? 50
Table 4.6 Rating agencies' actions on the eve and aftermath of the Asian crisis, June-December 1997 51
Table 4.7 Do financial crises help predict credit rating downgrades? (Institutional Investor) 52
Table 4.8 Do financial crises predict credit rating downgrades? (Moody's) 52
Table 5.1 Signals of currency crises, June 1996-June 1997 57
Table 5.2 Borderline signals of currency crises, June 1996-June 1997 59
Table 5.3 Signals of banking crises, June 1996-June 1997 60
Table 5.4 Borderline signals of banking crises, June 1996-June 1997 61
Table 5.5 Weighting the signals for currency and banking crises in emerging markets, June 1996-June 1997 62
Table 5.6 Vulnerability to financial crises in emerging markets: alternative measures, June 1996-June 1997 63
Table 5.7 Composite indicator and conditional probabilities of financial crises 66
Table 5.8 Scoring the forecasts: quadratic probability scores 67
Table 6.1 Crises that showed few signals, 1970-97 74
Table 6.2 Conditional probabilities and noise-to-signal ratios for financial and trade clusters 77
Table 6.3 Countries sharing financial and trade clusters with original crisis country or region 80
Table 6.4 Contagion vulnerability index 81
Table 6.5 Characteristics of affected countries in Asian and Mexican episodes 82
Table 6.6 Asia and Latin America: added power of Thai crisis in explaining probability of contagion in bank cluster, July 1997 83
Table 7.1 Length of recovery from financial crises 86
Table 7.2 Time elapsed from beginning of banking crises to their peaks 87
Table 7.3 Comparison of inflation and growth before and after currency crises 88
Table 7.4 The wake of devaluations: a review of the literature 90
Table 7.5 Comparison of severity of crises by region and period, 1970-97 92
Table 8.1 Currency and banking crises: best performing indicators 97
Table 8.2 Country rankings of vulnerability to currency crises for two periods 99
Table 8.3 Country rankings of vulnerability to banking crises for two periods 101
Figures
Figure 2.1 Mexico: real exchange rate, 1970-96 31
Figure 5.1 Probability of currency crises for four Southeast Asian countries, 1990-97 69
Read More Show Less

Customer Reviews

Be the first to write a review
( 0 )
Rating Distribution

5 Star

(0)

4 Star

(0)

3 Star

(0)

2 Star

(0)

1 Star

(0)

Your Rating:

Your Name: Create a Pen Name or

Barnes & Noble.com Review Rules

Our reader reviews allow you to share your comments on titles you liked, or didn't, with others. By submitting an online review, you are representing to Barnes & Noble.com that all information contained in your review is original and accurate in all respects, and that the submission of such content by you and the posting of such content by Barnes & Noble.com does not and will not violate the rights of any third party. Please follow the rules below to help ensure that your review can be posted.

Reviews by Our Customers Under the Age of 13

We highly value and respect everyone's opinion concerning the titles we offer. However, we cannot allow persons under the age of 13 to have accounts at BN.com or to post customer reviews. Please see our Terms of Use for more details.

What to exclude from your review:

Please do not write about reviews, commentary, or information posted on the product page. If you see any errors in the information on the product page, please send us an email.

Reviews should not contain any of the following:

  • - HTML tags, profanity, obscenities, vulgarities, or comments that defame anyone
  • - Time-sensitive information such as tour dates, signings, lectures, etc.
  • - Single-word reviews. Other people will read your review to discover why you liked or didn't like the title. Be descriptive.
  • - Comments focusing on the author or that may ruin the ending for others
  • - Phone numbers, addresses, URLs
  • - Pricing and availability information or alternative ordering information
  • - Advertisements or commercial solicitation

Reminder:

  • - By submitting a review, you grant to Barnes & Noble.com and its sublicensees the royalty-free, perpetual, irrevocable right and license to use the review in accordance with the Barnes & Noble.com Terms of Use.
  • - Barnes & Noble.com reserves the right not to post any review -- particularly those that do not follow the terms and conditions of these Rules. Barnes & Noble.com also reserves the right to remove any review at any time without notice.
  • - See Terms of Use for other conditions and disclaimers.
Search for Products You'd Like to Recommend

Recommend other products that relate to your review. Just search for them below and share!

Create a Pen Name

Your Pen Name is your unique identity on BN.com. It will appear on the reviews you write and other website activities. Your Pen Name cannot be edited, changed or deleted once submitted.

 
Your Pen Name can be any combination of alphanumeric characters (plus - and _), and must be at least two characters long.

Continue Anonymously

    If you find inappropriate content, please report it to Barnes & Noble
    Why is this product inappropriate?
    Comments (optional)