International Journal of Banking, Economics and Finance

International Journal of Banking, Economics and Finance ISSN: 8201-4728 Vol. 3 (2), pp. 001-011, February, 2019. © International Scholars Journals

Full Length Research Paper

An evaluation of leading indicators of currency crises

Chi-Wei Su^1,2*, Hsu-Ling Chang^2,3 and Meng-Nan Zhu² and Zhang Qiao²

¹Department of International Trade, Tamkang University, No.151, Yingzhuan Rd., Danshui Town, Taipei County 25137, Taiwan.

²Department of Finance, Xiamen University, China.

³Department of Accounting and Information, Lin Tung University, Taiwan.

Accepted 14 July, 2018

Abstract

This study tries to construct leading indicators for currency crisis using probit model, logit model and binary quantile regression. The empirical results show that the Inflation rate, Stock price index, Import growth rate, export/GDP, direct investment abroad, GDP growth rate, terms of trade changes, financial derivatives and domestic credit/GDP have significant effects on the occurrence of currency crisis. The Logit model is better than the probit model and binary regression quantiles which is certain, and the Financial derivatives and Direct investment abroad are useful for leading indicators of currency crises.

Key words: Currency crises, binary quantile regression, probit model, logit model.