Exchange Rate Regime Choice and Currency Crises
Posted: 13 Mar 2012
Date Written: March 12, 2012
Exchange rate regime choice is not exogenous, but it depends on the structural, political and financial features of countries. However, it is often the case that the regime actually pursued and the one that is imposed by country features do not match one to one. The existing empirical crisis models do not take fully into account the regime in which the crisis unfolded. The aim of this paper is to incorporate the appropriateness of the regime choice into the standard currency crisis model. The results show that the odds of crisis increase significantly in countries which have chosen regimes inconsistently.
Keywords: Exchange rate regime choice, Currency crisis, Multinomial crisis model
JEL Classification: F31, F41
Suggested Citation: Suggested Citation