... International Financial Statistics (IFS), the Interna-
tional Finance Corporation’s (IFC) Emerging Market Indicators, and the
Institute for International Economics | http://www.iie.com
108 ASSESSING FINANCIAL ... predicting the Asian crisis than the models of Frankel and Rose (1996) and of Sachs,
Tornell, and Velasco (1996).
11. See Berg and Pattillo (1999), The Economist (1998), F...
... Outlook.
Although the contagion of financial disturbances usually runs from
large countries to smaller ones, the Asian financial crisis has shown that
severe financial- sector difficulties in even ... 1996; Kaminsky and Reinhart 2000).
The more costly it is to clean up after a financial crisis, the greater the
returns to designing a well-functioning early warning system.
6. See C...
... weak and when an extensive
9. For example, the studies of banking crises in emerging markets by Caprio and Klingebiel
(1996a, 1996b), Goldstein and Turner (1996), Honohan (1995), and Sundararajan ... with international financial rescue packages might be reduced.
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12 ASSESSING FINANCIAL VULNERABILITY
the 1997-99 Asian...
... and the
exchange rate. For instance, in the banking panics of an earlier era large
withdrawals of bank deposits could be used to date the crisis. In the wake
of deposit insurance, however, bank ... useful for
dating banking crises. As Japan’s banking crisis highlights, many modern
financial crises stem from the asset side of the balance sheet, not from
deposit withdrawals. Hence the p...
... broad range of indicators in anticipating crises.
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36 ASSESSING FINANCIAL VULNERABILITY
banking crises, the maximum ranking change is ... with a considerable
lag and hence tend to be of less use from an early warning standpoint.
Table 3.6 presents the lead times for our monthly indicators—both for
currency and banking...
... other
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50 ASSESSING FINANCIAL VULNERABILITY
Table 4.4 Do ratings predict banking crises for emerging markets?
(probit estimation with robust standard ... countries can tap international financial markets. In their
analysis, they focus on the sovereign ratings of Moody’s and Standard &
Poor’s; in what follows, we ex...
... to remain an elusive task for academics, financial market
participants, and policymakers. Recent events, however, have highlighted
the importance of improving upon a system of early warnings. ... 0 26
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62 ASSESSING FINANCIAL VULNERABILITY
Table 5.5 Weighting the signals for currency and banking crises in
emerging...
... gen-
eral. For example, the quadratic probability score declines from 0.024 and
1.620 for the naive forecast of currency crises to 0.018 and 1.589 for the
real exchange rate forecast during tranquil and ... to
which crises probabilities increased for other emerging markets following
the Mexican crisis of 1994 and the Asian crisis of 1997, owing to trade
and financial links.
Most...
... the European
exchange ratemechanism (ERM)crisis andthe stronggrowth performance
of the Australian economy in 1998 coincident with a large depreciation
of the Australian dollar.
1. For a comparison ... does not change much for those Latin American
countries and the Philippines that are not a part of the Japanese bank
cluster. For them, the contagion from the Thai crisis via this channel...
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96 ASSESSING FINANCIAL VULNERABILITY
tendency, the better-performing leading indicators anticipated between
50 and 100 percent of the banking and currency crises that occurred
over ... more important for
banking crises than for currency crises, whereas the opposite proved true
for the two indicators designed to capture currency/maturity mismatches
a...