EMPIRICAL ANALYSIS OF SPECULATIVE ATTACKS WITH CONTRACTIONARY REAL EFFECTS

The effects of a currency crisis on a country's economy depend on nonlinear relations among several variables that characterize the economic, financial, legal and socio-political structure of the country at the onset of the crisis. Those effects can be associated with contractions or expansions in output. Historically, contractionary speculative attacks are more frequent. This paper uses a parametric censored heteroscedastic TOBIT model to empirically analyse how different economic and financial variables determine the real effects of a contractionary speculative attack. Variables describing the banking sector, the international trade, the severity of the crisis and foreign interest rates are found to be significant in explaining the size of currency crises' contractionary real effects. The TOBIT's results are compared with alternative modelling strategies. Copyright (C) 2012 John Wiley & Sons, Ltd.