Determinants of Currency Crises in Emerging Markets: The Case of Turkey

This paper investigates possible determinants of currency crises in Turkey. We use three different techniques-namely, the signaling approach, structural model, and Markov switching model with monthly data for the period 1992-2004. The results show that money market pressure index, real-sector confidence index, and public-sector variables are significant in explaining currency crises. Hence, one can say that banking crises lead to currency crises. Central banks' real-sector confidence index may be a good leading indicator for currency crises.