Measuring Potential Vulnerabilities in Emerging Market Economies

46 Pages Posted: 13 Dec 2005

See all articles by John Hawkins

John Hawkins

The Treasury

Marc Klau

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: October 2000

Abstract

This paper describes some experiments with the construction of relatively simple indices which summarise in a systematic and objective way information about emerging economies currently under pressure in financial markets and those vulnerable to such pressure in the future. A survey of the literature suggests financial crises are typically preceded by overvalued exchange rates, inadequate international reserves, recessions and excessive credit growth. These indicators and others, such as short-term external debt, which appear more important in recent crises are included in the summary indices of vulnerability. The vulnerability indices are shown to have modest predictive power for the pressure index but are far from conclusive in themselves.

Suggested Citation

Hawkins, John and Klau, Marc, Measuring Potential Vulnerabilities in Emerging Market Economies (October 2000). BIS Working Paper No. 91, Available at SSRN: https://ssrn.com/abstract=849258 or http://dx.doi.org/10.2139/ssrn.849258

John Hawkins

The Treasury ( email )

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Marc Klau (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

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