Political Conditions and Currency Crises: Empirical Regularities in Emerging Markets

Steven Block

No 79A, CID Working Papers from Center for International Development at Harvard University

Abstract: This paper demonstrates the impact of structural political conditions on the likelihood of currency crises in emerging markets. Controlling for a standard and parsimonious set of macroeconomic variables, I find that: left-wing government is more conducive to currency crises; democracies are less vulnerable; and strong governments (those with larger legislative majorities and those which face more fragmented legislative opposition) are also less vulnerable. In contrast to previous studies, I also find elections (and executive change) not to be associated with currency crises. Despite the strong statistical association between currency crises and these political variables, in- and out-of-sample predictions demonstrate the remaining difficulty of predicting the timing of currency crises.

Keywords: currency crises; politics; emerging markets (search for similar items in EconPapers)
JEL-codes: D72 F31 F32 O23 (search for similar items in EconPapers)
Date: 2002-03
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:cid:wpfacu:79a

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