Setting up a Sovereign Wealth Fund to Reduce Currency Crises

Jean-Baptiste Hasse, Christelle Lecourt () and Souhila Siagh
Additional contact information
Christelle Lecourt: Aix-Marseille Univ., CNRS, AMSE, Marseille, France, https://www.amse-aixmarseille.fr/en/members/lecourt
Souhila Siagh: Aix-Marseille Univ., CERGAM, Marseille, France, https://cergam.univ-amu.fr/fr

No 2417, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: This paper assesses whether and how setting up a sovereign wealth fund has a buffer effect against currency crises. Using an innovative dynamic logitpanel model framework and a unique dataset covering 34 emerging countries over the period 1989–2019, we empirically show that sovereign wealth fundsreduce the occurrence of currency crises. This result is robust to different econometric specifications, alternative definitions of sovereign wealth funds, controlling for currency crisis risk factors, and income level sampling. Our findings have important implications for financial stability and for policymakers, who could further exploit the potential of sovereign wealth funds to better manage foreign exchange risks.

Keywords: Currency Crisis; Sovereign Wealth Funds; Financial Stability (search for similar items in EconPapers)
Pages: 55 pages
Date: 2024-05
New Economics Papers: this item is included in nep-fdg
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Related works:
Journal Article: Setting up a sovereign wealth fund to reduce currency crises (2024)
Working Paper: Setting up a sovereign wealth fund to reduce currency crises (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:2417

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