An evaluation of leading indicators of currency crises

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.