Contagion and Crises Clusters: Toward a Regional Warning System?

This paper studies the spatial heterogeneity of the relationship between contagious currency crises and their determinants using a Geographically Weighted Regression (GWR) framework. This novel method enables a vector of local parameter estimates to be estimated for each country of the data set, according to its nearest neighbours. The approach makes it possible to derive locally-specific models, thereby improving standard prevention schemes and assessments for international financial assistance. Our findings suggest that economic attributes and imbalances of neighbouring countries can be introduced into country-specific warning systems. JEL no. F31, C31