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Currency Crises, Capital-Account Liberalization, and Selection Bias

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Listed:
  • Reuven Glick

    (Federal Reserve Bank of San Francisco)

  • Xueyan Guo

    (University of California, Santa Cruz)

  • Michael Hutchison

    (University of California, Santa Cruz)

Abstract

Are countries with unregulated capital flows more vulnerable to currency crises? Efforts to answer this question properly must control for self-selection bias, because countries with liberalized capital accounts may also have sounder economic policies and institutions that make them less likely to experience crises. We employ a matching and propensity-score methodology to address this issue in a panel analysis of developing countries. Our results suggest that, after controlling for sample selection bias, countries with liberalized capital accounts experience a lower likelihood of currency crises. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Reuven Glick & Xueyan Guo & Michael Hutchison, 2006. "Currency Crises, Capital-Account Liberalization, and Selection Bias," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 698-714, November.
  • Handle: RePEc:tpr:restat:v:88:y:2006:i:4:p:698-714
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