 Evaluating the effect of de facto pegs on currency crisesTaro Esaka Journal of Policy Modeling, 2013, vol. 35, issue 6, 943-963 Abstract: This paper empirically evaluates the treatment effect of de facto pegged regimes on the occurrence of currency crises. To estimate the treatment effect of pegged regimes properly, we must carefully control for the self-selection problem of regime adoption because a country's exchange rate regime choice is nonrandom. To address the self-selection problem, we thus employ a variety of matching methods. We find interesting and robust evidence that (1) pegged regimes significantly decrease the likelihood of currency crises compared with floating regimes, and (2) pegged regimes with capital account liberalization significantly lower the likelihood of currency crises compared with other regimes. From the standpoint of the macroeconomic policy trilemma, we can reasonably conclude that pegged regimes with capital account liberalization are substantially less prone to speculative attacks because they can enhance greater credibility in their currencies by maintaining strict discipline for monetary and macroeconomic policies. Keywords: Exchange rate regimes; Capital account liberalization; Currency crises; Self-selection bias; Matching methods (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:35:y:2013:i:6:p:943-963 DOI: 10.1016/j.jpolmod.2013.02.002 Access Statistics for this article Journal of Policy Modeling is currently edited by A. M. Costa More articles in Journal of Policy Modeling from Elsevier |
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