Currency Crises, Exchange Rate Regimes, and Capital Account Liberalization: A Duration Analysis Approach
This paper empirically analyzes the effect of exchange rate regimes and capital account liberalization policies on the occurrence of currency crises for 21 countries over the period of1970-1998. We examine changes of the likelihood of currency crises under de jure, and de facto exchange rate regimes. We also test whether the impact of the exchange rate regimes on currency stability would be different under free and restricted capital flows. Our findings show that the likelihood of currency crises changes significantly under de facto regimes. However, the results are sensitive to the choice of de facto exchange rate arrangements. Furthermore, in our sample, capital control policies appear to be helpful in preventing low duration currency crises. The results are robust to a wide variety of sample and models checks.
|JEL||Foreign Exchange (jel F31), Current Account Adjustment; Short-Term Capital Movements (jel F32), International Monetary Arrangements and Institutions (jel F33), Financial Crises (jel G01)|
|Publisher||Department of Economics|
|Series||Carleton Economic Papers (CEP)|
Karimi, Mohammad, & Voia, M.-C. (2011). Currency Crises, Exchange Rate Regimes, and Capital Account Liberalization: A Duration Analysis Approach (No. CEP 11-12). Carleton Economic Papers (CEP). Department of Economics.