Based on the study of Kaminsky and Reinhart (1999), this paper studies and applies early warning systems of currency crises to the case of Vietnam from 1996 to 2014. Its results show that the currency crisis is signaled six times during the observed period. | Vo Thi Thuy Anh et al / Journal of Economic Development 23(4) 97-116 97 Early Warning Systems of Currency Crises: An Empirical Investigation in Vietnam VO THI THUY ANH The University of Danang – University of Economics – vothuyanh@ TRAN NGUYEN TRAM ANH The University of Danang – University of Economics – anhtnt@ HA XUAN THUY The University of Danang – University of Economics – thuyhx91@ ARTICLE INFO ABSTRACT Article history: Based on the study of Kaminsky and Reinhart (1999), this paper studies and applies early warning systems of currency crises to the case of Vietnam from 1996 to 2014. Its results show that the currency crisis is signaled six times during the observed period. Several principal indicators of the currency crisis in Vietnam include increased import, decreased export, excess real M1 balances, low international reserves and deposit growth, high interest rate and credit growth, high domestic-foreign rate differential, and decreased real output. Hence, the Government and the State Bank of Vietnam should grant appropriate policies not only to control the money supply and interest rate, but also to stimulate the ability of capital mobilization of Vietnam’s banking system and to facilitate export activities in the coming years. Received: Apr. 12, 2016 Received in revised form: May 30, 2016 Accepted: Sep. 23, 2016 Keywords: Currency crisis, finance, early warning system. 98 Vo Thi Thuy Anh et al / Journal of Economic Development 23(4) 97-116 1. Problem statement Currency crises have occurred in different places of the world over the past two decades, especially the 1996–1997 period and these recent years, which arouses concern of both economic analysts and policy makers. To date, there have been four generation currency crisis models. While the macro factors are accentuated in first- and secondgeneration models, third-generation ones attempt to interpret the matters involving the Asian crises during 1996–1997 with the
