Early Warning Systems for Currency Crises: The Turkish Case

Posted: 23 Nov 2012

See all articles by Ali Ari

Ali Ari

affiliation not provided to SSRN

Date Written: 2012

Abstract

Different severe financial crises episodes occurred in the Turkish economy in the last two decades. These crises led to severe economic and social consequences for Turkey in terms of increasing interest rates, large reserves losses, considerable currency depreciations, high output losses and high unemployment rates. This paper aims to illustrate the essential determinants of these crises by developing a multivariate logit model which estimates the predictive ability of sixteen economic and financial indicators in a sample that covers the period from January 1990 to December 2008. The empirical findings show that the Turkish crises are mainly due to excessive fiscal deficits, high money supply growths, sharp rises in short-term external debt, growing riskiness of the banking system (in particular currency and liquidity mismatches), and external adverse shocks.

Keywords: currency crises, crisis determinants, crisis prediction, Turkey

JEL Classification: C25, C53, G01

Suggested Citation

Ari, Ali, Early Warning Systems for Currency Crises: The Turkish Case (2012). Economic Systems, Vol. 36, No. 3, 2012, Available at SSRN: https://ssrn.com/abstract=2179591

Ali Ari (Contact Author)

affiliation not provided to SSRN ( email )

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