Early warning systems for currency and systemic banking crises in Vietnam. Issue 3 (3rd April 2022)

• Record Type: Journal Article
• Authors: Ha, Dao; Nguyen, Phuong; Nguyen, Duc Khuong; Sensoy, Ahmet
• Is Part Of: Post-communist economies. Volume 34:Issue 3(2022)
• Page Start: 350
• Page End: 375
• Publication Date: 2022-04-03
• Subjects: Early warning indicators -- currency and banking crises -- Vietnam; Post-communism -- Economic aspects -- Periodicals; Russia (Federation) -- Economic conditions -- Periodicals; Europe, Eastern -- Economic conditions -- Periodicals; 330.91717
• DOI: 10.1080/14631377.2021.1965362
• Languages: English
• ISSNs: 1463-1377

Abstract

ABSTRACT: This paper introduces a new early warning system (EWS) for currency and systemic banking crises in emerging and frontier emerging markets, which combines the methods of Signal, Logit/Probit, BMA, and 2SLS. We apply this framework to the case of Vietnam, a fast-growing and leading frontier emerging market. Using data covering the period from January 2002 to December 2016, our EWS suggests a low crisis probability for the 2017–2018 period. The empirical results also reveal the importance of eight key indicators, namely securities index, real effective exchange rate, exports, M2/reserves, bank deposits, reserves, M2 multiplier and the impact of the 2008–2009 global financial crisis in the success of the new EWS. Our results support the earlier findings on i) the impact of dollarisation on currency crises and ii) the impact of the global financial crisis on both currency and systemic banking crises in Vietnam.