Evaluating the Treatment Effect of Hard Pegs: New Wine in Old Bottles

Zheng-Hao Lai () and Jyh-Lin Wu ()
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Zheng-Hao Lai: National Chung Cheng University
Jyh-Lin Wu: National Sun Yat-Sen University

Open Economies Review, 2023, vol. 34, issue 4, No 3, 813-830

Abstract: Abstract The purpose of this article is to investigate the average treatment effect of hard pegs. The innovation of the paper is to control for the sample selection bias. Using the unbalanced panel data of non-industrial countries, we find that, compared with non-hard-peg countries, hard-peg countries have significantly lower inflation, inflation volatility, output growth, and trade growth but have higher output growth volatility. For industrial countries, we find that the results are similar to those of non-industrial countries, except that hard pegs do not significantly reduce inflation and inflation volatility. Based on all countries, the treatment effect of hard pegs is qualitatively similar to those obtained from non-industrial countries. These results are robust to different matching methods.

Keywords: Treatment effects; Exchange rate regimes; Sample selection bias (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11079-022-09688-0

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