IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/22804.html
   My bibliography  Save this paper

Predicting Instability

Author

Listed:
  • Razzak, Weshah

Abstract

Unanticipated shocks could lead to instability, which is reflected in statistically significant changes in distributions of independent Gaussian random variables. Changes in the conditional moments of stationary variables are predictable. We provide a framework based on a statistic for the Sample Generalized Variance, which is useful for interrogating real time data and to predicting statistically significant sudden and large shifts in the conditional variance of a vector of correlated macroeconomic variables. Central banks can incorporate the framework in the policy making process.

Suggested Citation

  • Razzak, Weshah, 2010. "Predicting Instability," MPRA Paper 22804, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:22804
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/22804/1/MPRA_paper_22804.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Melvin, Michael & Taylor, Mark P., 2009. "The crisis in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1317-1330, December.
    2. 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.
    3. John C. Williams & John B. Taylor, 2009. "A Black Swan in the Money Market," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 58-83, January.
    4. John B. Taylor, 2009. "The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong," NBER Working Papers 14631, National Bureau of Economic Research, Inc.
    5. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Is the 2007 US Sub-Prime Financial Crisis So Different?: An International Historical Comparison," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 291-299.
    6. Malik, Farooq, 2003. "Sudden changes in variance and volatility persistence in foreign exchange markets," Journal of Multinational Financial Management, Elsevier, vol. 13(3), pages 217-230, July.
    7. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
    8. Razzak, W. A., 1991. "Target zone exchange rate," Economics Letters, Elsevier, vol. 35(1), pages 63-70, January.
    9. Fernandez, Viviana, 2006. "The impact of major global events on volatility shifts: Evidence from the Asian crisis and 9/11," Economic Systems, Elsevier, vol. 30(1), pages 79-97, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises: Explanations, Types and Implications," CAMA Working Papers 2013-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. David M. Kemme & Saktinil Roy, 2012. "Did the Recent Housing Boom Signal the Global Financial Crisis?," Southern Economic Journal, Southern Economic Association, vol. 78(3), pages 999-1018, January.
    3. David M. Kemme & Saktinil Roy, 2012. "Did the Recent Housing Boom Signal the Global Financial Crisis?," Southern Economic Journal, John Wiley & Sons, vol. 78(3), pages 999-1018, January.
    4. David M. Kemme & Saktinil Roy, 2012. "Did the Recent Housing Boom Signal the Global Financial Crisis?," Southern Economic Journal, John Wiley & Sons, vol. 78(3), pages 999-1018, January.
    5. Roy, Saktinil & Kemme, David M., 2012. "Causes of banking crises: Deregulation, credit booms and asset bubbles, then and now," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 270-294.
    6. Alessi, Lucia & Detken, Carsten, 2011. "Quasi real time early warning indicators for costly asset price boom/bust cycles: A role for global liquidity," European Journal of Political Economy, Elsevier, vol. 27(3), pages 520-533, September.
    7. Yang Chang, 2014. "A Consistent Approach to Modelling the Interest Rate Market Anomalies Post the Global Financial Crisis," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2-2014, January-A.
    8. Hertrich Markus, 2019. "A Novel Housing Price Misalignment Indicator for Germany," German Economic Review, De Gruyter, vol. 20(4), pages 759-794, December.
    9. Sager, Michael & Taylor, Mark P., 2014. "Generating currency trading rules from the term structure of forward foreign exchange premia," Journal of International Money and Finance, Elsevier, vol. 44(C), pages 230-250.
    10. Kim, Teakdong & Koo, Bonwoo & Park, Minsoo, 2013. "Role of financial regulation and innovation in the financial crisis," Journal of Financial Stability, Elsevier, vol. 9(4), pages 662-672.
    11. Marc Hayford & Anastasios Malliaris, 2010. "Asset Prices and the Financial Crisis of 2007--09: An Overview of Theories and Policies," Forum for Social Economics, Taylor & Francis Journals, vol. 39(3), pages 279-286, January.
    12. Carol Osler, 2012. "Market Microstructure and the Profitability of Currency Trading," Working Papers 48, Brandeis University, Department of Economics and International Business School.
    13. Dragoljub Stojanov, 2009. "Keynes and economic crisis: some reconsiderations," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 27(2), pages 293-310.
    14. Borce Trenovski & Biljana Tashevska & Suzana Makreshanska, 2015. "The Global Economic Crisis - What Should Not Be Forgotten," Journal Articles, Center For Economic Analyses, pages 99-112, June.
    15. Kaehler, Juergen & Weber, Christoph S., 2023. "Inflation in the aftermath of financial crises," Economic Modelling, Elsevier, vol. 128(C).
    16. Charles Bean, 2010. "Joseph Schumpeter Lecture The Great Moderation, The Great Panic, and The Great Contraction," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 289-325, 04-05.
    17. Tassos Anastasatos & Constantina Manou, 2008. "Speculative Attacks on the Drachma and the Changeover to the Euro," Economic Bulletin, Bank of Greece, issue 31, pages 49-77, November.
    18. Kam-hon CHU & Bob Y. C. Chan & Chor-yiu Sin, 2000. "Contagion Effects, Informational Effects, and Economic Fundamentals: An Analysis of Exchange Rate Dynamics during the Asian Currency Crisis," Working Papers 022000, Hong Kong Institute for Monetary Research.
    19. Agnello, Luca & Schuknecht, Ludger, 2011. "Booms and busts in housing markets: Determinants and implications," Journal of Housing Economics, Elsevier, vol. 20(3), pages 171-190, September.
    20. Mohana Rao BALAGA & Puja PADHI, 2017. "Evaluating Indian economy’s vulnerability to currency crisis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(612), A), pages 97-114, Autumn.

    More about this item

    Keywords

    Sample Generalized Variance; Conditional Variance; Sudden and Large Shifts in the Moments;
    All these keywords.

    JEL classification:

    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:22804. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.