Title: Predicting sharp depreciations in industrial country exchange rates
Description: "This paper considers the prediction of large depreciations (both nominal and real) in a panel of industrialized countries using a probit methodology.  The current account balance/GDP ratio has a modest but statistically significant effect on the estimated probability of a large depreciation, and gives slight predictive power in an out-of-sample forecasting exercise.  The CPI inflation rate also has a modest but statistically significant effect in predicting nominal depreciations and has slight predictive power, but this effect is not present for real exchange rates.  The GDP growth rate occasionally has a significant effect.  A higher current account balance (surplus) tends to reduce the probability of a sharp depreciation; a higher inflation rate tends to increase the probability of a sharp depreciation; and a higher GDP growth rate perhaps tends to reduce the probability of a sharp depreciation"--Federal Reserve Board web site.