Template-Type: ReDIF-Paper 1.0
Author-Name:  Christian Bauer
Author-X-Name-First: Christian
Author-X-Name-Last: Bauer

Author-Name:  Bernhard Herz
Author-X-Name-First: Bernhard
Author-X-Name-Last: Herz

Author-Name:  Volker Karb
Author-X-Name-First: Volker
Author-X-Name-Last: Karb

Title: Are twin currency and debt crises special?
Abstract: In the literature on currency and banking crises it has become the standard procedure to distinguish pure currency crises, pure banking crises and combined (“twin”) currency and banking crises. We show theoretically and empirically that a similar differentiation should be chosen with regard to currency and debt crises. Twin currency and debt crises differ from both pure currency and pure debt crises in their determinants, course of events, and economic consequences. We find that each type of crises has a unique set of macroeconomic causes. We also identify internal contagion and selection bias effects, which may lead to biased empirical estimates if twin crises are not treated as a specific type of crises. Such a separation allows to significantly improve the efficiency of early warning systems especially for debt and twin crises.
Length:  37 pages
Creation-Date:  2006-09
File-URL: http://www.bgpe.de/texte/DP/019_bauer_herz_karb.pdf
File-Format: Application/pdf
File-Function: First version, 2006
Number: 019
Classification-JEL: F31, F33, F34, F41
Keywords: currency crises, debt crises, twin crises, emerging markets
Handle: RePEc:bav:wpaper:019_bauer_herz_karb