We develop an early-warning model of sovereign debt crises. A country is defined to be in a debt crisis if it is classified as being in default by Standard & Poor's, or if it has access to nonconcessional IMF financing in excess of 100 percent of quota. By means of logit and binary recursive...

This paper analyzes the behavior of output during currency crises using a sample of 195 crisis episodes in 91 developing countries during 1970-98. It finds that more than two-fifths of the crises in the sample were expansionary, and that output contraction was greater in large and more developed...

This paper reviews the nature of central bank involvement in 26 episodes of financial disturbance and crises in Latin America from the mid-1990s onwards. It finds that, except in a handful of cases, large amounts of central bank money were used to cope with large and small crises alike. Pouring...

This paper seeks to draw lessons from the IMF’s experience in handling financial crises around the globe over the past ten years that are relevant to the challenges faced by countries in Latin America, especially in the wake of the recent crisis in Argentina. Experience suggests that...

Many estimates of early-warning-system (EWS) models of currency crisis have reported incorrect standard errors because of serial correlation in the context of panel probit regressions. This paper documents the magnitude of the problem, proposes and tests a solution, and applies it to previously...

Since 1999, the IMF's staff has been tracking several early-warning-system (EWS) models of currency crisis. The results have been mixed. One of the long-horizon models has performed well relative to pure guesswork and to available non-model-based forecasts, such as agency ratings and private...

This paper investigates empirically the relevance of external, domestic, and financial weaknesses as well as trade and financial linkages in inducing financial crises for a sample of 61 emerging market and industrial countries. A panel probit estimation finds these economic indicators to be...

Previous early-warning systems (EWSs) for currency crises have relied on models that require a priori dating of crises. This paper proposes an alternative EWS, based on a Markov-switching model, which identifies and characterizes crisis periods endogenously; this also allows the model to utilize...

Fiscal problems have long been considered a central feature of financial--that is, currency, debt, and banking--crises. This paper addresses four questions: What are the fiscal causes of crises? Which fiscal vulnerability indicators help to predict crises? Can fiscal variables explain the...

To test the role of bank lending in transmitting currency crisis we examine a panel of BIS data on bank flows to 30 emerging markets disaggregated by 11 banking centers. We find that bank exposures to a crisis country help predict bank flows in third countries after the Mexican and Asian crisis,...