Statistical distributions and the identification of currency crises

We use extreme value theory to identify periods of currency crisis for a broad cross-section of Asian, European, and Latin American countries. We argue that our methodology improves upon the more conventional methodology for defining currency crises because fewer parametric assumptions need to be satisfied. We compare the incidence of currency crises using the conventional method with the incidence obtained using our method. We conclude that identifying currency crises using extreme value theory is a good alternative to the conventional method.