Forecasting Financial Crises and Contagion in Asia using Dynamic Factor Analysis

Andrea Cipollini () and George Kapetanios

Center for Economic Research (RECent) from University of Modena and Reggio E., Dept. of Economics "Marco Biagi"

Abstract: In this paper we use principal components analysis to obtain vulnerability indicators able to predict financial turmoil. Probit modelling through principal components and also stochastic simulation of a Dynamic Factor model are used to produce the corresponding probability forecasts regarding the currency crisis events a®ecting a number of East Asian countries during the 1997-1998 period. The principal components model improves upon a number of competing models, in terms of out-of-sample forecasting performance.

Keywords: Financial Contagion; Dynamic Factor Model (search for similar items in EconPapers)
JEL-codes: C32 C51 F34 (search for similar items in EconPapers)
Pages: pages 21
Date: 2008-03
New Economics Papers: this item is included in nep-ecm, nep-for, nep-ifn and nep-sea
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Forecasting financial crises and contagion in Asia using dynamic factor analysis (2009)
Working Paper: Forecasting Financial Crises and Contagion in Asia using Dynamic Factor Analysis (2006)
Working Paper: Forecasting Financial Crises and Contagion in Asia Using Dynamic Factor Analysis (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:mod:recent:014

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