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Abstract
We use a panel of annual data for over one hundred developing countries from 1971 through
1992 to characterize currency crashes. We define a currency crash as a large change of the
nominal exchange rate that is also a substantial increase in the rate of change of nominal
depreciation. We examine the composition of the debt as well as its level, and a variety of
other macroeconomic factors, external and foreign. Crashes tend to occur when: output
growth is low; the growth of domestic credit is high; and the level of foreign interest rates is
high. A low ratio of FDI to debt is consistently associated with a high likelihood of a crash.