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Are the Central and Eastern European Transition Countries still vulnerable to a Financial Crisis? Results from a Multivariate Logit Analysis

Author

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  • Linne, Thomas

    (Institute for Economic Research Halle)

  • Axel Bruggermann

Abstract

The aim of the paper is to analyse the determinants of financial crises in a sample of nine transition countries in Central and Eastern Europe with a modified logit model. The modification takes explicitly into account the rare event characteristic of a currency crisis. Our results suggest that it is possible to explain the occurrence of crises with only a small number of macroeconomic variables. The variables which contribute positively to the probability of a crisis are: i) the ratio of the current account deficit to GDP; ii) the ratio of the budget deficit to GDP; iii) the change in currency reserves; iv) the amount of real appreciation of the currency relative to a trend, and v) the change in exports. Short-term debt by banks, which played a key role in the history of the Asian crises, was not an important factor in the build up of the crisis potential in Central and Eastern Europe.

Suggested Citation

  • Linne, Thomas & Axel Bruggermann, 2003. "Are the Central and Eastern European Transition Countries still vulnerable to a Financial Crisis? Results from a Multivariate Logit Analysis," Royal Economic Society Annual Conference 2003 141, Royal Economic Society.
    • Handle: RePEc:ecj:ac2003:141
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    Citations

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    Cited by:

    1. Bucevska, Vesna, 2011. "An anaylsis of financial crisis by an early warning system model: The Case of the EU candidate countries," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 4(1), pages 1-14, January.
    2. Agnieszka Markiewicz, 2006. "How Central and Eastern European Countries Choose Exchange Rate Regimes," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 69-84.
    3. Vesna Bucevska, 2011. "Growth effect of aid and its volatility: An individual country study in South Asian economies," Business and Economic Horizons (BEH), Prague Development Center, vol. 4(1), pages 13-26, January.

    More about this item

    Keywords

    currency crisis; logit-analysis; Central and Eastern Europe;
    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

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