2025 CFA Level II Exam: CFA Study Preparation

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The following stylized facts were found by an IMF study:

In the period leading up to a crisis, the real exchange rate is substantially higher than its mean level during tranquil periods.
The trade balance does not signal impending currency crisis.
Foreign exchange reserves tend to decline precipitously as the crisis approaches.
On average, the terms of trade deteriorate somewhat leading up to a crisis.
Inflation tends to be significantly higher in pre-crisis periods.
The ratio of M2 to bank reserves tend to rise in the 24-month period leading up to a crisis, then plummets sharply in the months immediately following a crisis.
Broad money growth in nominal and real terms tends to rise sharply in the two years leading up to a currency crisis, peaking around 18 months before a crisis hit.
Nominal private credit growth tends to rise sharply in the period leading up to a crisis.
Currency crises are often preceded by a boom-bust cycle in financial asset prices.
Real economic activity does not display any distinctive pattern ahead of a crisis but falls sharply in the aftermath of a crisis.

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