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Comparing the Performance of Logit and Probit Early Warning Systems for Currency Crises in Emerging Market Economies, Fabio Comelli

Abstract
We compare how logit (fixed effects) and probit early warning systems (EWS) predict insample and out-of-sample currency crises in emerging markets (EMs). We look at episodes of currency crises that took place in 29 EMs between January 1995 and December 2012. Stronger real GDP growth rates and higher net foreign assets significantly reduce the probability of experiencing a currency crisis, while high levels of credit to the private sector increase it. We find that the logit and probit EWS out-of-sample performances are broadly similar, and that the EWS performance can be very sensitive both to the size of the estimation sample, and to the crisis definition employed. For macroeconomic policy purposes, we conclude that a currency crisis definition identifying more rather than less crisis episodes should be used, even if this may lead to the risk of issuing false alarms
Table Of Contents
Cover; Abstract; Contents; I. Introduction; II. Literature Review; III. Methodology; Figures; Figure 1. Exchange Rate Pressure Index and Thresholds: January 1995-December 2012; IV. Results; Tables; Table 1. Logit Fixed Effects Regression: Coefficient Estimates; Table 2. Probit Regression: Coefficient Estimates; V. The Performance of The Selected Early Warning System; Figure 1. Areas Under Receiver Operating Characteristic (ROC) Curves; Table 3. Logit EWS: In-sample and Out-of-sample Performances; Table 4. Probit EWS: In-sample and Out-of-sample Performances; VI. Conclusions; References; Annex
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (27 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781475589993

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