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Previous early-warning systems (EWSs) for currency crises have relied on models that require a priori dating of crises. This paper proposes an alternative EWS, based on a Markov-switching model, which identifies and characterizes crisis periods endogenously; this also allows the model to utilize information contained in exchange rate dynamics. The model is estimated using data for the period 1972-99 for the Asian crisis countries, taking a country-by-country approach. The model outperforms standard EWSs, both in signaling crises and reducing false alarms. Two lessons emerge. First, accounting for the dynamics of exchange rates is important. Second, different indicators matter for different countries, suggesting that the assumption of parameter constancy underlying panel estimates of EWSs may contribute to poor performance.

Econometrics --- Financial Risk Management --- Foreign Exchange --- Macroeconomics --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Forecasting and Other Model Applications --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Financial Crises --- Economic & financial crises & disasters --- Currency --- Foreign exchange --- Econometrics & economic statistics --- Early warning systems --- Financial crises --- Currency crises --- Exchange rates --- Markov-switching models --- Econometric analysis --- Crisis management --- Econometric models --- Thailand

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Despite stops, gaps, and reversals, financial reforms advanced worldwide in the last quarter century. Using a new index of financial liberalization, we conclude that influential events shook the status quo, inducing both reforms and reversals, while learning, more so than ideology and country structure, shaped and sustained widespread reforms. Among shocks, a decline in global interest rates and balance of payments crises strengthened reformers; banking crises were associated with reversals, while new governments brought about both reforms and reversals. Learning occurred domestically-initial reforms raised the likelihood of further reforms-and through observing regional reform leaders. Among structural features, greater openness to trade appears to have increased the pace of financial reform.

Banks and Banking --- Finance: General --- Money and Monetary Policy --- Public Finance --- Industries: Financial Services --- Capitalist Systems: Planning, Coordination, and Reform --- Political Economy --- Socialist Institutions and Their Transitions: Financial Economics --- Economic History: Financial Markets and Institutions: General, International, or Comparative --- Financial Institutions and Services: Government Policy and Regulation --- Financial Institutions and Services: General --- Financial Crises --- Interest Rates: Determination, Term Structure, and Effects --- General Financial Markets: Government Policy and Regulation --- Taxation, Subsidies, and Revenue: General --- Economic & financial crises & disasters --- Monetary economics --- Financial services law & regulation --- Public finance & taxation --- Finance --- Financial sector --- Banking crises --- Interest rate policy --- Financial sector reform --- Legal support in revenue administration --- Economic sectors --- Financial crises --- Monetary policy --- Multilateral development institutions --- Financial institutions --- Financial regulation and supervision --- Financial services industry --- Interest rates --- Revenue --- Development banks --- United States

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La libéralisation du secteur financier était une priorité des décideurs politiques au cours du dernier quart du XXe siècle, mais avec une grande variété tant dans la cadence que dans l'étendue des réformes. Cette brochure examine les facteurs qui déclenchent, entravent ou contrecarrent la réforme financière dans 35 pays industrialisés ou en développement.

Banks and Banking --- Industries: Financial Services --- Financial Institutions and Services: General --- Financial Crises --- Economic & financial crises & disasters --- Financial sector --- Banking crises --- Financial services industry --- Financial crises --- New Zealand

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La liberalización del sector financiero ocupó un lugar destacado en la agenda de trabajo de las autoridades de política económica durante el último cuarto del siglo XX. Pero ha habido diferencias significativas en el ritmo y la escala de la reforma. Este folleto examina los factores que han activado u obstaculizado, o incluso revertido, la reforma financiera en 25 economías, tanto industriales como en desarrollo.

Banks and Banking --- Industries: Financial Services --- Financial Institutions and Services: General --- Financial Crises --- Economic & financial crises & disasters --- Financial sector --- Banking crises --- Financial services industry --- Financial crises --- New Zealand

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Financial sector liberalization was high on the agenda of policymakers during the last quarter of the twentieth century. But there were significant differences in the pace and scale of reform. This pamphlet examines the factors triggering-or impeding and even reversing-financial reform in 35 economies, both industrial and developing.

Banks and Banking --- Industries: Financial Services --- Financial Institutions and Services: General --- Financial Crises --- Economic & financial crises & disasters --- Financial sector --- Banking crises --- Financial services industry --- Financial crises --- New Zealand