Design Early Warning Systems of Currency Crises for Iran's Economy Focusing on the Variables of the Financial Sector of the Economy

Subject Areas : Financial Economics

Abbas Keshvari ¹ , Gholamreza Zomorodian ²

1 -
2 - financial branch, Islamic Azad University . Central of Tehran

Received: 2022-11-02 Accepted : 2024-11-24 Published : 2025-07-02

Keywords: Early Warning System (EWS), Exchange Market Pressure Index, Currency Crisis, Inflation.,

Abstract :

In this study to by focusing on the variables of the real and public sectors, The external balance and the financial sector, an appropriate warning system was designed to assess the currency crises during the period of 1991:4-2021:3. First, the years of currency crisis were identified through the Exchange Market Pressure index. Then, using the signaling method, crisis-guiding variables are determined and in the framework of the logit model, the role of them on the currency crisis is analyzed. Based on the results of 1995, 2011, 2012, 2018 and 2020 were determined as the years of currency crisis. In addition, industrial production, real GDP growth, the ratio of current account deficit to real GDP, foreign exchange earnings from oil and gas exports and total foreign exchange earnings are the variables that the increase of them, is reduced the likelihood of a currency crisis. In contrast to inflation, the ratio of budget deficit to real GDP, the ratio of "bank debt to central bank" to monetary base, bank debt to central bank and government debt to central bank are variables that increase the likelihood of a currency crisis.