Markov Switching VAR Model of Speculative Pressure: An Application to the Asian Financial Crisis
Markov switching models with time-varying transition probabilities address the limitations of the earlier methods in the early warning system literature on currency crises. Most of the Markov switching models in the literature are largely based on univariate models of exchange rate fluctuations. In...
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sg-smu-ink.etd_coll-10262010-09-08T01:24:04Z Markov Switching VAR Model of Speculative Pressure: An Application to the Asian Financial Crisis VARGAS, Gregorio III Alfredo Markov switching models with time-varying transition probabilities address the limitations of the earlier methods in the early warning system literature on currency crises. Most of the Markov switching models in the literature are largely based on univariate models of exchange rate fluctuations. In this thesis, the components of the index of speculative pressure are modeled using the Markov Switching VAR with time-varying transition probabilities of Martinez Peria (2002). Two approaches, both of which are derived from this model, are taken to determine the probability of a currency crisis: the probability of a turbulent regime and the expected value of the index of speculative pressure. This study shows that the Markov Switching VAR model with time-varying transition probabilities is a good method to use in building an early warning system of a currency crisis. Results show significant improvement on predicting the Asian Financial Crisis by signaling its occurrence at an earlier period with a higher probability when the probability of a turbulent regime approach is employed. It is also more sensitive in detecting turbulent periods that are not necessarily currency crises and therefore renders itself useful in short-term forecasting of speculative pressure episodes. The leading indicators of the Asian Financial Crisis identified in this study are real effective exchange rate, export growth, GDP growth, real domestic credit, M2 ratio, deposits to M2 ratio and non-FDI flows. 2009-01-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/etd_coll/27 https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1026&context=etd_coll http://creativecommons.org/licenses/by-nc-nd/4.0/ Dissertations and Theses Collection (Open Access) eng Institutional Knowledge at Singapore Management University autoregressive modelling economic impact Markov-switching models maximum likelihood recessions time-varying transition probabilities Econometrics Finance |
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autoregressive modelling economic impact Markov-switching models maximum likelihood recessions time-varying transition probabilities Econometrics Finance VARGAS, Gregorio III Alfredo Markov Switching VAR Model of Speculative Pressure: An Application to the Asian Financial Crisis |
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Markov switching models with time-varying transition probabilities address the limitations of the earlier methods in the early warning system literature on currency crises. Most of the Markov switching models in the literature are largely based on univariate models of exchange rate fluctuations. In this thesis, the components of the index of speculative pressure are modeled using the Markov Switching VAR with time-varying transition probabilities of Martinez Peria (2002). Two approaches, both of which are derived from this model, are taken to determine the probability of a currency crisis: the probability of a turbulent regime and the expected value of the index of speculative pressure. This study shows that the Markov Switching VAR model with time-varying transition probabilities is a good method to use in building an early warning system of a currency crisis. Results show significant improvement on predicting the Asian Financial Crisis by signaling its occurrence at an earlier period with a higher probability when the probability of a turbulent regime approach is employed. It is also more sensitive in detecting turbulent periods that are not necessarily currency crises and therefore renders itself useful in short-term forecasting of speculative pressure episodes. The leading indicators of the Asian Financial Crisis identified in this study are real effective exchange rate, export growth, GDP growth, real domestic credit, M2 ratio, deposits to M2 ratio and non-FDI flows. |
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VARGAS, Gregorio III Alfredo |
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VARGAS, Gregorio III Alfredo |
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VARGAS, Gregorio III Alfredo |
title |
Markov Switching VAR Model of Speculative Pressure: An Application to the Asian Financial Crisis |
title_short |
Markov Switching VAR Model of Speculative Pressure: An Application to the Asian Financial Crisis |
title_full |
Markov Switching VAR Model of Speculative Pressure: An Application to the Asian Financial Crisis |
title_fullStr |
Markov Switching VAR Model of Speculative Pressure: An Application to the Asian Financial Crisis |
title_full_unstemmed |
Markov Switching VAR Model of Speculative Pressure: An Application to the Asian Financial Crisis |
title_sort |
markov switching var model of speculative pressure: an application to the asian financial crisis |
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Institutional Knowledge at Singapore Management University |
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2009 |
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https://ink.library.smu.edu.sg/etd_coll/27 https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1026&context=etd_coll |
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