Can the persistence of a currency crisis be explained by fundamentals? Markov switching models for exchange market pressure
Year: 2009
Type: article
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.
Authors: Tomoe Moore, P Wang
Institutions: Brunel University of London, University of Birmingham
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W155290232