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EVALUATING CURRENCY CRISES: A MULTIVARIATE MARKOV REGIME SWITCHING APPROACH *
Author(s) -
MOURATIDIS KOSTAS,
KENOURGIOS DIMITRIS,
SAMITAS ARIS,
VOUGAS DIMITRIS
Publication year - 2013
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2012.02259.x
Subject(s) - devaluation , multivariate statistics , currency , markov chain , economics , econometrics , set (abstract data type) , monetary economics , computer science , mathematics , statistics , programming language
This paper provides an empirical framework to analyse the nature of currency crises by extending earlier work of Jeanne and Masson (2000; Journal of International Economics , Vol. 50, pp. 327–350). Jeanne and Masson suggest a Markov regime switching models to analyse models of currency crises with multiple equilibria. This paper further contributes to the literature by suggesting a multivariate Markov regime switching model. In the new set‐up, one can test for the impact of the unobserved dynamics of fundamentals on the probability of devaluation.