Early Warning System for the prediction of currency crises: The Bolivian case in the period from 2008 to 2018
DOI:
https://doi.org/10.35319/0w6v4n44Keywords:
Currency crisis, Bolivian economy, Early Warning SystemAbstract
In this paper we study the effect of country-specific factors, as well as international factors, on the probability of a currency crisis in Bolivia. The estimated probability of a country facing a crisis increases with the existence of an overvalued currency, a fall in international reserves in relation to the amount of money in circulation, a drop in exports, and an increase in the types of interests. An early warning system based on the previous set of leading indicators would help to identify situations of financial vulnerability, so as to allow us to avoid the negative impact of balance of payments crises on the economy and society. For this purpose, this paper aims to formulate an early warning system based on the historical analysis of a series of indicators, in order to predict the occurrence of a currency crisis in Bolivia for the years 2017 and 2018.
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