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Can Financial Openness Help Avoid Currency Crises?

  • Garita, Gus
  • Zhou, Chen

By introducing the concept of conditional probability of joint failure (CPJF), and by proposing a new measure for the systemic impact of currency crises, we provide new insights into the different sources of currency crises. We conclude that financial openness helps to diminish the probability of a currency crisis even after controlling for the onset of a banking crisis, that systemic currency crises mainly exist regionally, and that monetary policy geared towards price stability reduces the probability of a currency crisis.

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File URL: http://mpra.ub.uni-muenchen.de/23166/1/MPRA_paper_23166.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23166.

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Date of creation: Feb 2009
Date of revision: 07 Jun 2010
Handle: RePEc:pra:mprapa:23166
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  1. Paolo Pesenti & Cedric Tille, 2000. "The economics of currency crises and contagion: an introduction," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 3-16.
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  15. Masson, Paul, 1999. "Contagion:: macroeconomic models with multiple equilibria," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 587-602, August.
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