PREDICTING THE FINANCIAL CRISES WITH SIGNAL APPROACH: AN ANALYSIS FOR TURKEY, ARGENTINA, THAILAND AND ENGLAND

The aim of this study is to analyze the predictability of financial crises in the period of 1990-2010 for turkey, argentina, thailand and england by using signal approach. the financial pressure index, composing of standardized values of percentage changes at nominal exchange rate, interest rate and foreign exchange reserves is taken as the dependent variable. fifteen different independent variables are determined in order to explain the financial pressure index. the most significant indicators for predicting financial crises are found to be real interest rate differentials between countries, deviation of real exchange rate from the trend, money market pressure index, increases in the rate of industrial production to domestic loans. through the signal approach the financial crises experienced in turkey in 1994 and 2001, argentina in 2002, thailand in 1997 and england in 1992 and 2008 are successfully predicted.