Are global shocks leading indicators of currency crisis in Viet Nam? |
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| Institution: | 1. University of Sousse, Sousse 4054, Tunisia;2. IPAG Business School, Paris 75006, France;3. University of Manouba, Manouba 2010, Tunisia;1. The Higher Institute of Management, ISG Tunis, Tunisia;2. Université de Tunis, ISG, GEF2A lab, Tunis, Tunisia;3. Faculty of Law, Economics and Management of Jendouba, Tunisia;4. Faculty of Economic and Management of Nabeul, Tunisia;1. Department of Economic and Regional Development, Panteion University, 136 Syngrou Av., Athens, 176 71, Greece;2. Postgraduate Department of Business Administration, Hellenic Open University, Aristotelous 18, 26 335, Greece;1. Department of Accounting and Finance, Technological Educational Institute of Peloponnese, Kalamata, Greece;2. Department of Banking and Financial Management, University of Piraeus, Greece;1. University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group, Richmond Building, Portland Street, PO1 3DE, United Kingdom;2. Al Yamamah University, 7010 King Fahd Road, Al Qirawan, Riyadh 13541, Saudi Arabia |
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| Abstract: | This paper aims to identify leading indicators of a currency crisis in Viet Nam based on an early warning system for the period 1996–February 2016. This paper found that global financial shocks (e.g., regional and global financial crisis, unexpected changes in monetary policy of largest economies such as the United States and the People’s Republic of China), and domestic credit growth rate are leading indicators of a currency crisis in Viet Nam in all three models. Deficits in trade balance, international reserves, and overvaluation of the dong are also good indicators. In addition, a model in which a currency crisis or turbulence in the foreign exchange market is defined based on the exchange market pressure and parallel market premium, with window length of 2 months, outperformed for predicting a currency crisis in Viet Nam. Empirical results suggested that probability of predicting a true currency crisis was 77.5%. |
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| Keywords: | Early warning system (EWS) Currency crisis Global shock Exchange market pressure (EMP) Viet Nam |
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