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An Early Warning System for Currency Crisis: A Comparative Study for the Case of Jordan and Egypt

Author

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  • Ghazi Al-Assaf

    (Department of Business Economics, The University of Jordan, Amman, Jordan.)

Abstract

The paper investigates the differences between number of indicators used for an early warning system to explain any potential currency crisis for the case of Jordan and Egypt. The comparison is based on estimating various leading indicators that help in predicting the currency crises in the countries under investigation. A market pressure index was constructed and employed in a multinomial Logit model, using monthly data for Jordan and Egypt covering the period 1980-2015. The empirical results, show that real exchange rate (RER), money supply-reserves ratio (M2R), growth rate of domestic credit (?DC), Central Bank foreign assets to liabilities ratio (AL), and growth of exports play a significant role in explain the currency crises for both Jordan and Egypt economies. However, the money supply-reserves ratio is the one of the most significant indicators in predicting currency crisis for Jordan, while the RER is found for the case of Egypt.

Suggested Citation

  • Ghazi Al-Assaf, 2017. "An Early Warning System for Currency Crisis: A Comparative Study for the Case of Jordan and Egypt," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 43-50.
    • Handle: RePEc:eco:journ1:2017-03-7
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    References listed on IDEAS

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    Cited by:

    1. Baker Shnekat & Ghazi Al-Assaf, 2020. "The Impact of Political Stability on the Effectiveness of the Early Warning Systems in Predicting the Financial Crises: The Case of Jordan and Qatar," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 398-407, July.
    2. ICHOU Mohammed Adil & RASSAM Driss & ABBADI Idriss & ELHIRI Abderrazak, 2021. "Pressure Measurement on the Foreign Exchange Market and Currency Crises in Morocco," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 11(2), pages 1-4.
    3. Ammar Hamad Khalaf, 2018. "Foreign Exchange Market Pressure Index And Monetary Policy In Iraq," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 63(219), pages 61-82, October –.

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    More about this item

    Keywords

    Early Warning Systems; Currency Crisis; Logit Model; Jordan; Egypt;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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