Exchange Rate Regimes and Startup Investment Depth: The Creative Destruction Process

Ilias Chiboub and Hicham Sadok ()
Additional contact information
Hicham Sadok: University Mohammed V, Rabat, Morocco

Working Papers from HAL

Abstract: Exchange rate regime choices introduce structural trade-offs between financial stability and innovation incentives that shape the startup ecosystem. Utilizing a panel of 40 emerging economies from 2010 to 2024, we overcome data sparsity by deploying non-parametric Machine Learning imputation before constructing customized indices for financial infrastructure, depth, and openness channels. We employ Double Machine Learning Local Projections (DML-LP) to execute a nonlinear causal inference strategy. To prevent traditional fixed effects from mechanically absorbing the treatment variance of sticky exchange rate regimes, we embed the Hybrid-Mundlak controls directly within the DML-LP nuisance equations. Our findings reveal that unexpected transitions toward floating regimes catalyze a creative destruction process that expands financial infrastructure, whereas peg defenses reinforce structural stagnation. Paradoxically, startup depth responds positively to both financial infrastructure expansions and contractions. These dynamics highlight systemic reductions in financial frictions and powerful technological leapfrogging effects. Ultimately, we demonstrate that financial infrastructure serves as the underlying transmission mechanism through which floating regime shifts optimize private capital absorption and mobilization within startup ecosystems.

Date: 2026-08-30
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05731531

DOI: 10.2139/ssrn.7064458

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().