Leading indicators of balance-of-payments crises: a partial review

Michael Chui

Bank of England working papers from Bank of England

Abstract: This paper reviews the theory of balance-of-payments crises, and its implications for identifying potential leading indicators of crises. It discusses and evaluates three different empirical approaches to balance-of-payments crises: the signalling, discrete-choice, and structural approaches. Despite claims of success in predicting currency crises, we note some serious theoretical and empirical qualifications which throw these claims into question. Nevertheless, we conclude that a range of indicators supported by theory may still be useful for policy-makers interested in preventing financial instability.

Date: 2002-12
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:171

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