reserves. However, the supporters do not provide any logical explanations on the inclusion, and the change in international reserves is the concept of balance of payments crises rather than currency crises. Several currency crisis studies mix up balance of payments crises with currency crises. It seems more appropriate to use only successful currency attacks. Therefore only exchange rates should be used as an indicator.<sup>(6)</sup> In relation to the second issue, following the conceptual definition, nominal exchange rates are a suitable indicator regardless of the reasons behind the depreciation such as hyperinflation, political situation and macroeconomic conditions.<sup>(7)</sup> At the same time, real exchange rates are informative as the comparison between nominal and real exchange rates can be a clue for the cause of depreciation.

# **2.3.4 Debt Crises**

Finding an indicator fully compatible with the conceptual definition of external debt crises, which is _inability to service debts_ , is difficult. Debt related indicators show the severity of debt burden rather than inability to service debts. Paris Club debt rescheduling and/or debt reduction are implemented when a country faces external debt repayments difficulties. However, Paris Club deals with only bilateral public debt rather than whole external debt, and sometimes terms of rescheduling and/or debt reduction are politically determined. Therefore the incidences of Paris Club are not necessarily suitable to identify debt crises.

Consequently, the debt burden indicators are used as a proxy for a debt crisis indicator. Among numerous debt indicators, the IMF (2000, p.3 and p.26) states that the external debt to exports ratio is an especially useful indicator of trends in debt and repayment capacity, since the debt to exports ratio is less volatile than the debt to GDP ratio. While both denominator and numerator are measured in the US dollar for the debt to exports ratio, GDP data are basically on a local currency basis and then converted to the US dollar for the debt to GDP ratio. In this sense, the debt to GDP ratio may fluctuate more than the debt to exports ratio when exchange rates are unstable. In order to verify whether the debt to exports ratio is less volatile than the debt to GDP ratio, the standard deviation of two indicators of fifteen countries<sup>(8)</sup> are calculated between Q1 1980 and Q4 2002 depending on data availability. In eleven countries out of fifteen, the debt to GDP ratio is more volatile than the debt to exports ratio. Although arrears are one of the key indicators of debt burdens (Non-Aligned Movement Ad Hoc Advisory Group of Experts on Debt (1994), Detragiache and Spilimbergo (2001)), data on arrears are difficult to obtain on a quarterly basis. **2.3.5 Growth Rate Crises** Conceptual and operational definitions of growth rate crises are rarely found in various studies, although as a rule of thumb NBER (National Bureau of Economic Research) defines a US recession when seasonally adjusted quarterly growth rates are negative for two straight quarters. Bruno (1996, p.1) defines growth crises as “at least three consecutive years of negative growth (cumulating in a drop in growth of at least nine percent).” Here, conceptually growth rate crises can be defined as a sharp decline in real outputs. Operationally real economic growth rates on a year-on-year basis can be used as an indicator, since seasonally adjusted figures are not often available in emerging economies.

**2.3.6 Financial Crises**

There is no consensus on conceptual and operational definitions of financial crises. However from various studies, the essence of financial crises is ‘an abrupt loss of confidence in a country’s financial sector’. When a country faces a loss of confidence in its financial sector, financial resources abruptly attempt to flee 9