New strategies for currency crises early warning systems: a balance sheet approach

摘要: Despite third generation models of currency crises blame the private sector for recent crisis episodes, little has been done toward providing empirical evidence on such hypothesis. This work analyzes empirically the balance sheet effects of four additional channels of external vulnerability: the corporate and financial sectors, as well as the macroeconomic and legal environment. We provide a new set of early warning systems that build on indices of corporate governance, debt structure, leverage, and liquidity. Our proposed models complement existing early warning systems, and present superior forecasting performance. The introduction of microstructure indicators opens a window of new strategies for policy design toward limiting external vulnerability.