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Published: November 12, 2006
This study applies ordinary least squares (OLS) estimation procedures, with and without lags, to identify the causes of
currency crises in selected economies during the 1997-98 East Asian currency and
financial crisis. The author states that the cause of the crisis was attributed to
initial macroeconomic conditions, weak macroeconomic fundamentals, financial sector regulation, and policy reaction. The paper relates that the empirical results were consistent with previous literature on currency crises; episodes of depreciation appear to be associated with the depletion of foreign exchange
reserves and the increase in foreign liabilities. Equations. Tables. Table of Contents Introduction Classical Theory Empirical Research Explaining Currency Crisis First Generation Models Second Generation Models Third Generation Models Policy Reactions and the Role of the IMF Conceptual Model Initial Conditions Deterioration of Macroeconomic Fundamentals International Sector and Financial Regulation Macroeconomic Policy Ideal and Actual Data Measuring the Symptoms Measuring Currency Crisis Actual Data Results and Analysis Conclusion Appendix I: Summary of Data and Indicators Used in Previous Studies Appendix II: General F-Tests Appendix III: Statistical Analysis for Multicollinearity and Heteroskedasticity Appendix IV: E-views Output of Granger Causality Tests
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