Measurement of International Currency Crises: A Panel Data Approach Using Composite Indices

Abstract

This paper seeks to measure international currency crisis. It has taken the case of the A5 countries in 1997 and has developed a methodology meant to measure and explain currency crisis. The study uses Jha & Murthy (2006) approach for constructing composite indices for capturing the causes - macro-economic and financial - as well as an index of crisis. It combines continuous and discrete approaches defining and for measuring crises. It uses India as a 'control' which enables international and inter-temporal comparisons during crisis.With the help of these indices a panel regression model is developed for explaining the crisis. The paper measures the decomposition effects of causal financial and macro variables on the crises.