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Title: Can the persistence of a currency crisis be explained by fundamentals? Markov switching models for exchange market pressure
Authors: Moore, T
Wang, P
Keywords: Exchange market pressure;Markov switching model;Currency crisis;New EU member states
Issue Date: 2009
Publisher: Brunel University
Citation: Economics and Finance Working Paper, Brunel University, 09-36
Abstract: This paper investigates the contribution of fundamentals to the persistence of currency crises by identifying the determinants of high volatility in the exchange market pressure index (empi) for some new EU member states. The Markov switching model is utilised to identify the high volatility of empi, and a linear regression analysis is conducted to find the sources of the transition probability of the high volatility regime. The evidence does not seem to provide strong support for macroeconomic fundamentals, whereas it highlights the adverse movement of interest rates as the major determinant of the persistence of the currency crisis.
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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