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Brazilian Real Crisis Revisited: A Linear Probability Model to Identify Leading Indicators

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  • Feridun, M.

Abstract

This article aims at identifying the indicators of the Brazilian real crisis through building a probit model incorporating 20 monthly macroeconomic, political, and financial sector indicators from 1980:1 – 1999:1. Results indicate that the significant variables are inflation (1-month lag), real exchange rate (1-month lag), import growth (1-month lag), US interest rates (2-month lag), public debt/GDP (2-month lag), and current account/GDP (3-month lag). Evidence further indicates that the signs of the variables are in line with our expectations, with the exception of US interest rates.

Suggested Citation

  • Feridun, M., 2004. "Brazilian Real Crisis Revisited: A Linear Probability Model to Identify Leading Indicators," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 1(1), pages 81-96.
    • Handle: RePEc:eaa:ijaeqs:v:1:y2004:i:1_4
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    References listed on IDEAS

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    1. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
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    6. Berg, Andrew & Pattillo, Catherine, 1999. "Predicting currency crises:: The indicators approach and an alternative," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 561-586, August.
    7. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
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    Cited by:

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    2. Yanping Zhao & Jakob Haan & Bert Scholtens & Haizhen Yang, 2014. "Leading Indicators of Currency Crises: Are They the Same in Different Exchange Rate Regimes?," Open Economies Review, Springer, vol. 25(5), pages 937-957, November.
    3. Teuta Ismaili Muharremi, 2015. "Currency Crisis Revisited: A Literature Review," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(6), pages 117-124, December.
    4. Feridun, Mete, 2004. "Russian Financial Crisis of 1998: An Econometric Investigation," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 1(4), pages 113-122.
    5. Unver, Mustafa & Dogru, Bulent, 2015. "The Determinants of Economic Fragility: Case of the Fragile Five Countries," MPRA Paper 68734, University Library of Munich, Germany, revised 2015.

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    More about this item

    Keywords

    Mexican peso crisis; financial crises; probit model; Brazil;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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