Modelliing of Earlly Warniing Indiicators of Currency Crisis: Emphasizing the Evaluation of the Relationship Between Currency Crisis and Capital Control Index

Predicting currency fluctuations and crises is an important step in the foreign exchange policy of countries. Given that the purpose of early warning systems or patterns is to anticipate crises, their use is essential to prevent economic crises, including currency crises. Therefore, the purpose of this study is to model and rank the early warning factors of currency crisis by Bayesian averaging method. For this purpose, 70 variables warning of the currency crisis during the period 1970-2018 for the most important trading partners of Iran that have experienced the currency crisis in floating and non-floating currency systems are examined. Selective warning variables include a wide range of macroeconomic variables and financial variables that reflect the state of the economy in the real, monetary, political, public, foreign, institutional, and structural sectors. The results of this study show that the designed system has a high ability to predict currency crises in the period under review and identify the most important warning factors. Overall, the results indicate that considering the currency governance system in the models of currency crisis warning, sometimes different variables are introduced as currency crisis warning; So that changes in foreign exchange market pressure, changes in real effective exchange rates, the ratio of international reserves to foreign debt, real GDP growth and the percentage of foreign direct investment to GDP in the floating exchange rate system and changes in foreign exchange market pressure, Inflation, real effective exchange rate changes, the ratio of international reserves to GDP, and the ratio of exports of goods and services to GDP in the non-floating system are important warning indicators.