Indexing Speculative Pressure on an Exchange Rate Regime: A Case Study of Macedonia
28 Pages Posted: 1 Aug 2004
Date Written: May 3, 2005
Abstract
This paper modifies an ad hoc index originated by Eichengreen et al (1995,1996), which is often used to document financial crises in emerging markets. By assuming nonlinear dynamics in a system of financial data, we successfully develop an alternative approach that not only captures the essence of the conventional index but also offers an indicator that leads the crises in-sample. This is very important for policy markers of transitional economies like Macedonia, for which the historical macroeconomic data are often inadequate for existing "early warning sign" systems of potential crises.
Keywords: Currency crisis, exchange rates, forecasting, smooth transition autoregressive model, transitional economies
JEL Classification: C22, F31, P33
Suggested Citation: Suggested Citation
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