Economic growth and currency crisis: A real exchange rate entropic approach

Matesanz Gómez, David and Ortega, Guillermo J. (2005): Economic growth and currency crisis: A real exchange rate entropic approach. Published in: Documentos de trabajo Funcas (September 2006)

Abstract

We propose a country classification of economic growth currency crisis consequences based on the entropic analysis of the real exchange rate. We show that this ranking is highly correlated with the annual minimum rate of growth, a proxy used to quantify real currency crisis effects.

• Item Type: MPRA Paper
• Language: English
• Keywords: currency crises; entropy; growth effects of currency crises
• Subjects: C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology; Computer Programs > C82 - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F40 - General; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

References

Abiad, A., 2003, Early-Warning Systems: a Survey and a Regime-Switching Approach, IMF Working Paper 32, 1-60. Chou, L. W. and C. C. Chao, 2001, Are currency devaluations effective? A panel unit root test, Economics Letters 72, 19-25. Christopoulos, D. K., 2004, Currency devaluation and output growth: new evidence from panel data analysis, Applied Economics Letters 11, 809-813. Ebrahimi, N., Maasoumi, E. and E. S. Soofi, 1999, Ordering univariate distributions by entropy and variance, Journal of Econometrics 90 (2), 317-336 Kaminsky, G., Lizondo, S. and C. M. Reinhart, 1998, Leading Indicators of Currency Crises, IMF Staff Papers 45, 1-56. Kaminsky, G., Reinhart, M. and C.A. Vegh, 2003, The Unholy Trinity of Financial Contagion, Journal of Economic Perspectives, American Economic Association 17(4), 51-74. Pérez, J., 2005, Empirical identification of currency crises: differences and similarities between indicators, Applied Financial Economics Letters 1 (1), 41-46. Rigobon, R., 2003, On the measurement of international propagation of shocks: is the transmission stable?, Journal of International Economics 61, 261-283. Roulson, M.S., 1999, Estimating the errors on the measured entropy and mutual information, Physica D 125, 285-294. Shannon, C., 1948, A mathematical theory of communication, Bell Systems Tech. 27, 379-423.