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Do exchange rate regimes affect the role of central banks as banking supervisors?

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  • L. Dalla Pellegrina
  • D. Masciandaro
  • R. Pansini

Abstract

We investigate the effect that exchange rate regimes have on the degree of central bank involvement in banking supervision. Using both de jure and de facto exchange rate regimes, we find that, conditional on several other factors affecting supervisory power allocation, policymakers are more willing to delegate this task to central banks when the latter are pegging their currency to some kind of parity. This evidence is confirmed when instrumental variables are added, in order to account for possible endogeneity. Results suggest that exchange rate regime features can mitigate the trade offs that political authorities face in evaluating the possibility of assigning supervision to monetary authorities. Copyright Springer Science+Business Media, LLC 2014

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  • L. Dalla Pellegrina & D. Masciandaro & R. Pansini, 2014. "Do exchange rate regimes affect the role of central banks as banking supervisors?," European Journal of Law and Economics, Springer, vol. 38(2), pages 279-315, October.
    • Handle: RePEc:kap:ejlwec:v:38:y:2014:i:2:p:279-315
    DOI: 10.1007/s10657-012-9317-4
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    Cited by:

    1. Donato Masciandaro & Davide Romelli, 2017. "Twin Peaks And Central Banks: Economics, Political Economy And Comparative Analysis," BAFFI CAREFIN Working Papers 1768, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    2. Andrieş, Alin Marius & Nistor, Simona & Sprincean, Nicu, 2020. "The impact of central bank transparency on systemic risk—Evidence from Central and Eastern Europe," Research in International Business and Finance, Elsevier, vol. 51(C).
    3. Donato Masciandaro & Marc Quintyn, 2013. "The Evolution of Financial Supervision: the Continuing Search for the Holy Grail," SUERF 50th Anniversary Volume Chapters, in: Morten Balling & Ernest Gnan (ed.), 50 Years of Money and Finance: Lessons and Challenges, chapter 8, pages 263-318, SUERF - The European Money and Finance Forum.
    4. Dalla Pellegrina, L. & Masciandaro, D. & Pansini, R.V., 2013. "The central banker as prudential supervisor: Does independence matter?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 415-427.

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    More about this item

    Keywords

    Banking supervision; Exchange rate regimes; Central banks; Monetary policy; G18; G15; G28; G01; F31;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G01 - Financial Economics - - General - - - Financial Crises
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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