African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4150

Full Length Research Paper

An empirical analysis of currency crises, fundamentals and speculative pressure

  Nil R. Gunsel , Turgut Tursoy* and Husam Rjoub    
Department of Banking and Finance, Faculty of Economics and Administrative Sciences, Near East University, Nicosia, P. O. Box 670, Lefkosa, North Cyprus, Mersin 10, Turkey.
Email: [email protected]

  •  Accepted: 11 May 2010
  •  Published: 30 June 2010

Abstract

 

The main purpose of this paper is to investigate the linkage between economic fundamentals and currency crises for four different group of countries that experience very different growth path or crises from 1991 to 2006. For this purpose, logit model was used in identifying the determinants of the currency crises’ likelihood and the market pressure index (MPI) were used in determining the currency crises of the four different groups of countries. The study selects Argentina, Brazil and Mexico from America; Malaysia, Philippines, South Korea and Thailand from East and Southeast Asia; Russia and Turkey. The empirical findings stated that: (1) real interest rate, rate of inflation, growth rate of GDP, budget balance, real exchange rate and the ratio of M2 to foreign exchange reserves were statistically significant explanatory variables; (2) however, domestic credit to GDP and various types of trade variables were not statistically significant.

 

Key words: Determinants of currency crises, market pressure index, Logit model.