Determinants of Currency Disturbances in Transition Economies of Central and Eastern Europe

Sa？etak This paper explores how the "signals" approach can be used to examine determinants of currency disturbances in transition economies during 1990s. We construct the measure of a currency disturbance - an index of foreign exchange market pressure as a referent series. The "signals" approach is used in constructing an effective system of early warning indicators for each country. The system monitors the behavior of various macroeconomic and financial variables that exhibit an unusual pattern in the periods preceding a disturbance or a crisis. By comparing the resulting systems of early warning indicators we are searching for common determinants of currency disturbances in transition countries in the sample