Developing An Early Warning System For Currency Crises: The Case Of Jordan

Qasim M. Jdaitawi, Izz Eddien N. Ananzeh, Ahmed M. Al-Jayousi


In this paper an early warning system for currency crisis in Jordan was developed. The system is based on two standard empirical methods of researching and forecasting a currency crisis: the signaling method and the Logit method.  Our findings showed that all leading indicators on average sent signals within 6 to 24 months ahead of the crisis. Among the leading indicators, four variables were identified as key to the warning system; they were succeeded and precisely warning system showed also a behavior and a precise description for the period preceding the currency crisis that occurred in Jordan, and these variables were the sharp decline in international reserves, the decline in the trade balance, increase the broad money supply (M2), and finally the increase in the Dinar exchange rate.


Early warning system, Currency crises, crisis prediction, Signal approach, Logit

Full Text:



Baltagi, B. H. (1995). Econometric Analysis of Panel Data. Wiley & Sons, Inc., John.

Berg, A., & Pattillo, C. (1998). Are currency crises predictable? A test. IMF Working Paper, 98(154).

Edison, H. (2000). Do indicators of financial crises work? An evaluation of an early warning system, board of governors of the Federal Reserve System. International Finance Discussion Papers, 675, 1-74.

Eichengreen, Barry, Andrew, K. R., & Wyplosz C. (1994). Speculative attacks on pegged exchange rates: An empirical exploration with special reference to the european monetary system. NBER Working Paper, 4898.

Eichengreen, Barry, Andrew, K. R., & Wyplosz C. (1996). Contagious currency crises. NBER Working Paper, 5681, July

Frankel, J. A., & Andrew K. R. (1996). Currency crashes in emerging markets: Empirical indicators. NBER Working Paper, 5437, January.

Goldstein, Morris, Graciela, L. K., & Carmen M. R. (2000). Assessing Financial Vulnerability: An Early Warning System for Emerging Markets. Washington: Institute for International Economics.

Gujarati, D. N. (1988). Basic Econometrics (2th ed.). Singapore: McGraw-Hill.

Ivo, K. (2004). Currency crisis: Theory and practice with application to Croatia.

Kaminsky, G. (1998). Currency and banking crises – The early warning of distress. IMF Working Paper, WP/99/178.

Kaminsky, G., & Carmen R. (1999). The twin crises: The causes of banking and balance-of-payments problems. The American Economic Review, 89(3).

Kaminsky, G., Lizondo S., & Carmen R. (1998). Leading indicators of currency crises. IMF Staff Papers, 45(1).

Krugman, P. (1979). A model of balance-of-payments crises. Journal of Money, Credit and Banking, 11, 311-325.

Mishkin, F. S. (2000, Sep.). International experience with different monetary policy regimes. NBER Working Paper, 7044.

Sasin, M. (2001). Predicting currency crises, the ultimate significance of macroeconomic fundamentals in linear specifications with nonlinear extensions. CASE – Center for Social and Economic Research, Warsaw, Studies and Analyses, 224.

Tomczyٌska, Magdalena (2000): Early indicators of currency crises, review of some literature. CASE – Center for Social and Economic Research, Warsaw, Studies and Analyses, 208.

WEO (1998). World economic outlook. IMF.



  • There are currently no refbacks.

Copyright (c)

Share us to:   


  • How to do online submission to another Journal?
  • If you have already registered in Journal A, then how can you submit another article to Journal B? It takes two steps to make it happen:

1. Register yourself in Journal B as an Author

  • Find the journal you want to submit to in CATEGORIES, click on “VIEW JOURNAL”, “Online Submissions”, “GO TO LOGIN” and “Edit My Profile”. Check “Author” on the “Edit Profile” page, then “Save”.

2. Submission

  • Go to “User Home”, and click on “Author” under the name of Journal B. You may start a New Submission by clicking on “CLICK HERE”.

We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases:;;

 Articles published in Management Science and Engineering are licensed under Creative Commons Attribution 4.0 (CC-BY).


Address:1055 Rue Lucien-L'Allier, Unit #772, Montreal, QC H3G 3C4, Canada.

Telephone: 1-514-558 6138
Http:// Http://

Copyright © 2010 Canadian Research & Development Centre of Sciences and Cultures