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Allan Meltzer:
Leadership and Progress
Tim O'Neill:
Globalization: Fads, Fictions, and Facts
Douglas Lamdin:
Corporate Bond Yield Spreads in Recent Decades
Christopher Mills
and Eleonora Omarova: Predicting Currency Crises—A Practical
Application for Risk Managers
Ray Fair: Testing
for the New Economy in the 1990s
Stephen G. Cecchetti:
Monetary Policy in a Low Inflation Environment
Robert Eisenbeis,
Daniel Waggoner and Tao Zha: Evaluating Wall Street Journal Survey
Forecasters
Rajeev Dhawan:
Georgia State University’s Economic Forecasting Center
Book Reviews
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Predicting Currency
Crises—A Practical
Application for Risk
Managers
 By Christopher Mills and Eleonora Omarova
Christopher Mills is a global
risk analyst with Citigroup. He
has an MS in Economics from
the London School of
Economics, the CFA designation,
and was awarded the title
of Financial Risk Manager by
the Global Association of Risk
Professionals. He has worked
with the British Treasury,
Standard & Poor’s, and AT&T.
Nora Omarova is a vice president and global risk analyst
at Citigroup. Previously, she
worked for Travelers Investment
Group. She holds a MIA degree
from Columbia School of
International and Public
Affairs and is finishing her
doctoral research towards a
Ph.D. degree in finance at
Columbia University Graduate
School of Business.
 Since the Mexican and Asian currency crises, a body of
research has been developed in an effort to build early
warning systems to predict such crises. This paper presents
a practical application of a currency risk model
based on an extension of the signal extraction methodology
pioneered by Kaminsky and Reinhart (KR). We
describe the rationale for attempting to predict currency
crises, outline the methodology behind our model, and
discuss how the model can be used in practical applications,
with a particular focus on balancing the risk of
failing to signal a crisis against the risk of crying wolf
when crises do not materialize.
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