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Do hard pegs avoid currency crises? An evaluation using matching estimators

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  • Esaka, Taro
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    Abstract

    Using the bias-corrected matching estimators of Abadie and Imbens (2006) as a control for the self-selection problem of regime adoption, we estimate the average treatment effect of hard pegs on the occurrence of currency crises. We find the evidence that hard pegs significantly decrease the likelihood of currency crises compared with other regimes.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 113 (2011)
    Issue (Month): 1 (October)
    Pages: 35-38

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    Handle: RePEc:eee:ecolet:v:113:y:2011:i:1:p:35-38

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Exchange rate regimes Hard pegs Currency crises Self-selection bias Matching estimators;

    References

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    1. Esaka, Taro, 2010. "De facto exchange rate regimes and currency crises: Are pegged regimes with capital account liberalization really more prone to speculative attacks?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 34(6), pages 1109-1128, June.
    2. Reuven Glick & Xueyan Guo & Michael Hutchison, 2004. "Currency Crises, Capital Account Liberalization, and Selection Bias," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 04-11, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    3. Guido Imbens & Jeffrey Wooldridge, 2008. "Recent developments in the econometrics of program evaluation," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP24/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    4. Fasika Damte Haile & Susan Pozo, 2006. "Exchange Rate Regimes and Currency Crises: an Evaluation using Extreme Value Theory," Review of International Economics, Wiley Blackwell, vol. 14(4), pages 554-570, 09.
    5. Beck, T.H.L. & Clarke, G. & Groff, A. & Keefer , P. & Walsh, P., 2001. "New tools in comparative political economy: The database of political institutions," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125517, Tilburg University.
    6. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, American Economic Association, vol. 89(3), pages 473-500, June.
    7. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany.
    8. Brahima Coulibaly, 2009. "Currency unions and currency crises: an empirical assessment," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 14(3), pages 199-221.
    9. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
    10. Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, Econometric Society, vol. 74(1), pages 235-267, 01.
    11. Alberto Abadie & David Drukker & Jane Leber Herr & Guido W. Imbens, 2004. "Implementing matching estimators for average treatment effects in Stata," Stata Journal, StataCorp LP, StataCorp LP, vol. 4(3), pages 290-311, September.
    12. Paolo Mauro & Grace Juhn, 2002. "Long-Run Determinants of Exchange Rate Regimes," IMF Working Papers 02/104, International Monetary Fund.
    13. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
    14. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, Elsevier, vol. 49(6), pages 1603-1635, August.
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