Probabilities, Probits and the Timing of Currency Crises
Опубликовано на портале: 25-10-2007
This paper shows how a probit can be interpreted in terms of restrictions on a simple threshold model of the timing of a currency crisis, that is based on a standard theoretical model of crises. Using data for 25 emerging markets, a simple version of the threshold specification is shown to fit better than either a probit specification, or the exponential waiting time distribution implied by a poisson model of crises. The hypothesis that the threshold and probit models fit equally well can be rejected in favor of the threshold model. In addition, the threshold specification can be used to generate estimates of the probability of a crisis occurring over any future time horizon as a function of current country indicators. This is illustrated using a fuller version of the threshold model that incorporates information about the timing of crises
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