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This project focuses on predicting the occurrence of debt-based financial crises. Much of the political economy literature on financial crises has focused on hypothesis testing, positing one or more variables as important correlates of these crises. Some of these variables have been shown to be statistically significant correlates of financial crises, but most have not been evaluated as strong predictors. And while there have been attempts to forecast financial crises, most models rely on traditional economic indicators or structural characteristics and have not fully considered the predictive power of both domestic and international political indicators. We aim to use machine learning algorithms to identify the most relevant predictors and improve the accuracy of our forecasts. In addition, our forecasting models will generate predictions for financial crises for the next 18 months. These predictions, as derived from the model parameters, will be time-stamped, preregistered, and publicly displayed. This approach alleviates concerns that we are attempting to overfit existing observational data. The quality of our forecasts will be evaluated by events that have yet to occur, akin to the pre-registration of experimental data.

Episodes of debt accumulation have been a recurrent feature of the global economy over the past fifty years. Since 2010, emerging and developing economies have experienced another wave of historically large and rapid debt accumulation. Similar past debt buildups have often ended in widespread financial crises in these economies. This paper examines the factors that are likely to determine the outcome of the most recent debt wave, and considers policy options to help reduce the likelihood that it ends again in widespread crises. It reports two main results. First, the rapid increase in debt has made emerging and developing economies more vulnerable to shifts in market sentiment, notwithstanding historically low global interest rates. Second, policy options are available to lower the likelihood of financial crises, and to help manage the adverse impacts of crises when they do occur. These include sound debt management, strong monetary and fiscal frameworks, and robust bank supervision and regulation. The post-crisis debt buildup has coincided with a period of subdued growth as well as the emergence of non-traditional creditors. As a result, policy priorities also need to ensure that debt is spent on productive purposes to improve growth prospects and that all debt-related transactions are transparently reported.

Emerging market and developing economies have experienced recurrent episodes of rapid debt accumulation over the past fifty years. This paper examines the consequences of debt accumulation using a three-pronged approach: an event study of debt accumulation episodes in 100 emerging market and developing economies since 1970; a series of econometric models examining the linkages between debt and the probability of financial crises; and a set of case studies of rapid debt buildup that ended in crises. The paper reports four main results. First, episodes of debt accumulation are common, with more than 500 episodes occurring since 1970. Second, around half of these episodes were associated with financial crises which typically had worse economic outcomes than those without crises -- after 8 years output per capita was typically 6-10 percent lower and investment 15-22 percent weaker in crisis episodes. Third, a rapid buildup of debt, whether public or private, increased the likelihood of a financial crisis, as did a larger share of short-term external debt, higher debt service cover, and lower reserves cover. Fourth, countries that experienced financial crises frequently employed combinations of unsustainable fiscal, monetary and financial sector policies, and often suffered from structural and institutional weaknesses.

This paper presents a systematic analysis of the availability and use of fiscal space in emerging and developing economies. These economies built fiscal space in the run-up to the Great Recession of 2008-09, which was then used for stimulus. This reflects a more general trend over the past three decades, where availability of fiscal space has been associated with increasingly countercyclical (or less procyclical) fiscal policy. However, fiscal space has shrunk since the Great Recession and has not returned to pre-crisis levels. Emerging and developing economies face downside risks to growth and prospects of rising financing costs. In the event that these cause a sharp cyclical slowdown, policy makers may need to employ fiscal policy as a possible tool for stimulus. An important prerequisite for fiscal policy to be effective is that these economies have the necessary fiscal space to employ countercyclical policies. Over the medium-term, credible and well-designed institutional arrangements, such as fiscal rules, stabilization funds, and medium-term expenditure frameworks, can help build fiscal space and strengthen policy outcomes.

Latin America’s historically low saving rates and sub-par growth performance raise the question of whether the region should save more to grow faster. Economists generally resist acknowledging a policy-exploitable causal connection going from saving to growth because domestic saving is perceived to be fully endogenous, optimally determined, or fully substitutable by foreign saving. However, to the extent that these three assumptions do not hold, three channels can be established through which higher domestic saving—by curbing persistent current account deficits—can promote medium-term growth. The channels are first, a real interest rate channel, whereby higher saving reduces the cost of capital and enhances macro sustainability; second, a real exchange rate channel, through which higher saving leads to a more competitive real exchange rate; and third, an endogenous saving channel, whereby saving follows growth and, hence, subsequently compounds the effect of the first two channels. Econometric evidence supports all three channels and suggests that the lower-saving countries in Latin America and the Caribbean, especially those with recurrently weak balance of payments and persistent domestic demand pressures on the non-tradable sector, would benefit the most from boosting their saving rates.

This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.

India's economic performance in FY2009/10 shows that the recovery from the slowdown during the global financial crisis is well underway. India's Gross domestic Product (GDP) growth in FY2009/10 has beaten expectations by reaching 7.4 percent compared with 6.7 percent in the previous year. In particular, agricultural sector growth was better than feared with a slightly positive growth rate despite the worst monsoon shortfall in three decades. Strong growth in the fourth quarter pushed annual GDP growth to 7.4 percent in 2009-10. Fourth quarter growth reached 8.6 percent (y-o-y), the highest quarterly growth rate since the end of FY2007/08. The industrial sector's robust recovery beat expectations. Growth in the last quarter of fiscal year FY2009/10 was an unexpectedly high 13.3 percent resulting in over 12 percent growth in the second half of year, nearly double the 6 percent growth witnessed in the first half. Higher inflation mars the bright picture, but there are clear indications of moderation. Inflation as measured by the wholesale price index (WPI) averaged 10 percent during February-May 2010. India's recovery after the slowdown seems well underway. Growth is projected to climb to 8-9 percent in the next two years. These growth rates are achievable without a renewed build-up of inflationary pressure as long as agricultural growth returns to trend, infrastructure constraints are alleviated, and international prices remain stable. Over the next year, sources of growth will shift from fiscal stimulus to manufacturing and, possibly a recovering agriculture.

The global crisis is now in the rear view mirror and world growth is being restored. In sharp contrast with past episodes of global turmoil, this time the recovery is led by the periphery, specifically by the larger and more dynamic emerging markets (Brazil, China, India, South Korea, Malaysia, Philippines, and Thailand). For this group of emerging markets (EMs), the contraction in economic activity was much smaller than that of rich countries, the recovery started earlier, and the rebound has been much steeper. Latin America and the Caribbean (LAC) are second among emerging regions, after Asia, in the strength of the recovery. The first part of the report focuses on macroeconomic and financial aspects, emphasizing the outlook going forward. Finally, the second part examines some aspects of the adjustment in labor markets during this crisis in comparison to previous ones.

Latin America faces the twin challenges of achieving economic growth and reducing extreme inequality. Notwithstanding the heterogeneity among Latin American countries (LACs), most of them exhibit both: (i) low average Gross Domestic Product (GDP) growth; and (ii) increased inequality during the 1980s. This long period includes the 'lost decade,' when outcomes in both variables were evidently negative. These negative trends have persisted since the early 1990s, in the period of intense reforms under the Washington consensus. The development gap (difference in GDP per capita or per worker between rich countries and LACs) and the equity gap have broadened in this period. The report evaluate: (a) the macroeconomic environment in which agents make their decisions (usually in LACs, under an economic activity operating significantly below potential GDP, with outlier macro-prices, and fluctuating aggregate demand); (b) features of financial reforms (usually intensive in short-term segments and weak financing of risk and long-term financing), and their implications for capital formation and the distribution of opportunities in the domestic economy; (c) features of trade reforms (intensive in resource-based exports but low total output of tradable); and (d) the distribution of productivities, which is closely linked to the narrow space granted for the development of small and medium enterprises (SMEs).

Finansal krizler ülkemizde ve diğer gelişmekte olan ekonomilerde gelişmiş ülkelere ve önceki dönemlere göre 1990'lardan itibaren daha sık karşılaşılmakta ve daha maliyetli geçmektedir. Ekonominin krize mukavemetinin arttırılması, krize tam zamanında ve etkin müdahale edilmesi finansal krizlerin mahiyetinin teorik ve amprik açıdan iyi kavranmasını gerektirir.Çalışmada ülkemizde 1980 sonrasında tecrübe edilen krizlerin, finansal kriz teorileri zeminine oturtularak kavranması hedeflenmiştir.?Finansal kriz nedir?? sorusu cevaplanmış ve realitede tecrübe edilen finansal kriz türleri ele alınmıştır. Finansal kriz türleri para krizi, bankacılık krizi, sistemik finansal kriz, SS krizi, borç krizi, ikiz para ve bankacılık krizi, ikiz para ve borç krizi şeklinde tasnif edilmiştir.Finansal kriz teorileri birinci ve ikinci nesil para krizi teorileri, monetarist yaklaşım, finansal kırılganlık-aşırı spekülatif ticaret yaklaşımı, dış borç kriz teorisi, üçüncü nesil kriz teorileri, asimetrik bilgi yaklaşımı, SS kriz teorisi şeklinde sınıflandırılmıştır.Kriz yönetimi krize mukavemet ve krize müdahale şeklinde ele alınmıştır. Krize mukavemet gelecekte bir krizin vuku bulması açısından şimdiden kriz zemininin yok edilmesini hedefler. Krize müdahale başlamış veya başlamak üzere olan bir krizin nasıl durdurulacağını ve krizden nasıl çıkılacağını konu alır.?Olay? metodu ve yıllık veriler kullanılarak 1980 sonrasında ülkemizde tecrübe edilen finansal kriz vakaları tanımlanmıştır. Kriz mahiyetindeki finansal istikrarsızlıklar 1978-80, 1988, 1991, 1994, 1998-9, 2001 vakaları, kriz mahiyetinde olmayan istikrarsızlıklar 1984, 1986, 1996 (döviz kuru istikrarsızlıkları); 1981, 1984, 1993, 2000, 2002, 2003 (bankacılık sektörü istikrarsızlıkları) olarak tanımlanmıştır. Kriz tecrübelerinden 1978-80, 1988, 1991, 1994 vakalarının pür para krizi, 1998-9 vakasının pür bankacılık krizi, 2001 krizinin ikiz para ve bankacılık krizi, 1994, 2001 krizlerinin SS krizi olduğu sonucuna varılmıştır.Anahtar Sözcüklerdış borçfinansal krizasimetrik bilgiTürkiye ekonomisiikiz krizpara krizibankacılıkcari açıkborç krizisistemik risksermaye hareketleri Financial crises in the developping countries are more cost than in the developped countries. And they have been more cost since 1990?s than before. They have more frequently occurred in the EM countries since 1990?s. We have to understand theire natures to perform promt corrective action in the ideal time during intervention the crisis, and to decrease the backround of crisis.In this study we have target to explain the financial crises that have occurred in our country after 1980?s by comparing with the crises in the other EM countries and replacing theoretically to a ground. Financial crisis is a severe disturbence that causes to a serious contraction in the economy.In the first chapter we focused to the question as ?whaat is a financial crisis??. Additionally we classified the financial crises experied in reality as seven types: currency/BOP crises, banking crises, systemic financial crises, debt crises, Sudden Stops (SS) crises, twin currency and banking crises, and twin currency and debt crises.There are the financial crisis theories in second and thirth chapter. It is possible to classify the financial crises theories as that: first and second generation (canonical) currency crisis theories, monetarist approach, financial fragility/overtrading speculatively, foreign debt crisis theory, asymetric information approach, and SS crisis theories.Fourth chapter focused management crisis. The management crisis has been studied as two areas: first preventing or intervention the crises (recovery from crises) during happening., and second resistence to crises before happening.In the final chapter, we studied financial crises experied in our country after 1980 as the ?event?s? method and annual datas are used. The financial disturbence defined as financial crisis are the occurrences in 1978-80, 1988, 1991, 1994, 1998-9, and 2001. Those of them are sufficiently sever financial disturbences but non-crises: 1984, 1986, 1996 (that are currency rate instabilities), and 1981, 1984, 1993, 2000, 2002, and 2003 (that are banking instabilities). In this chapter, the financial crises occurred in our country since 1980 were emprically defined as that: 1978-80, 1988, 1991, and 1994 crises are pure currency crises; 1998-9 is a pure banking crisis; 2001 is twin currency and banking crisis; and 1994, 2001 are Sudden Stops (SS) crises.Key Wordssovereign debtfinancial crises, crisiscurrency crisis, crisesTurkey economytwin crisis, crisessystemic riskasymetric informationpanicdebt crises, defaultbankingcapital inflowscurrent deficit 506

We argue that one reason why emerging economies borrow short term is that it is cheaper than borrowing long term. This is especially the case during crises, as in these episodes the relative cost of long-term borrowing increases. We construct a unique database of sovereign bond prices, returns, and issuances at different maturities for 11 emerging economies from 1990 to 2009 and present a set of new stylized facts. On average, these countries pay a higher risk premium on long-term than on short-term bonds. During crises, the difference between the two risk premia increases and issuance shifts towards shorter maturities. To illustrate our argument, we present a simple model in which the maturity structure is the outcome of a risk sharing problem between an emerging economy subject to rollover crises and risk averse international investors., World Bank (Research Support Budget), International Monetary Fund, Ministerio de Ciencia e Innovación, Spain, Barcelona GSE, Generalitat de Catalunya

Sovereign credit ratings play an important part in determining countries' access to international capital markets and the terms of that access. In principle, there is no reason to expect that sovereign credit ratings should systematically predict currency crises. In practice, in emerging market economies there is a strong link between currency crises and default. Hence if credit ratings are forward-looking and currency crises in emerging market economies are linked to defaults, it follows that downgrades in credit ratings should systematically precede currency crises. This article presents results suggesting that sovereign credit ratings systematically fail to predict currency crises but do considerably better in predicting defaults. Downgrades in credit ratings usually follow currency crises, possibly suggesting that currency instability increases the risk of default.