The determinants of vulnerability to currency crises: country-specific factors versus regional factors |
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Authors: | Ping Wang Tomoe Moore |
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Affiliation: | 1. Birmingham Business School, University of Birmingham, Edgbaston, Birmingham, B15 2TT, UK 2. Department of Economics and Finance, Brunel University, Uxbridge, Middlesex, UB8 3PH, UK
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Abstract: | We investigate the determinants of exchange market pressures (EMP) for some new EU member states at both the national and regional levels, where macroeconomic and financial variables are considered as potential sources. The regional common factors are extracted from these variables by using dynamic factor analysis. The linear empirical analysis, in general, highlights the importance of country-specific factors to defend themselves against vulnerability in their external sectors. Yet, given a significant impact of the common component in credit on EMP, a contagion effect is apparent through the conduit of credit market integration across these countries under investigation. |
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