What Caused the Asian Crises: An Early Warning System Approach

type="main" xml:lang="en"> <p>We estimate a simple probit model of the probability of balance-of-payments crises over a panel of developing countries through 1995. We then forecast crisis probabilities for 1997. We find that a simple model composed of four traditional macroeconomic variables and one ‘second generation’ variable performs well in predicting the Asia crises. The Thai and Malaysian crises had predominantly first-generation features, while the crises in Korea and Indonesia are, to some extent, predictable largely on the basis of our second-generation variable. <p>(J.E.L.: F31, F47).