Anticipation of Currency Crisis in Iran Economy with the Use of an Early Warning System

Authors

1 Department of Management and Economics, University of Tarbiat Modares, Tehran, Iran.

2 Department of Economics, University of Isfahan, Isfahan, Iran.

3 Department of Economics, University of Isfahan, Isfahan, Iran

Abstract

Nowadays economists have paid much attention to prediction of currency crises due to their very negative effects on the performance of real economies and the consequences of its subsequent recession. The use of an early warning system for currency crises is therefore introduced as an empirical tool for troubleshooting Iran macroeconomic problems. Based on studies conducted in other countries and using conventional methods of extracting symptoms and estimating crisis probability, an early warning system for currency crises is presented to the Iran economy that can warn currency crises beforehand. Using Multi-layer Perceptron Neural Network and Hard-Limit function, the Early Warning System is design to consider seasonal data for the period of 2001 to 2015 to anticipate currency crisis of 2019(based on 12-season warning periods). The results predicted show that no currency crisis is threatening Iran economy in 2019. The export index is one of the leading variables in the system, which has the greatest impact on currency crises. In addition, according to the previous data and their substitution in this model, the years 1993, 2001 and 2003 are signaled as critical years. It therefore can be concluded that the present research model is reliable.
 

Keywords