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Crises and exchange rate regimes: time to break down the bipolar view?

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  • Jean-Louis Combes
  • Alexandru Minea
  • Moussé Sow

Abstract

We revisit the link between crises and exchange rate regimes (ERR). Using a wide panel of 90 developed and developing countries over the period 1980–2009, we find that corner ERR are not more prone to crises compared to intermediate ERR. This finding holds for different types of crises (banking, currency and debt), and is robust to a wide set of alternative specifications. Consequently, we clearly break down the traditional bipolar view: countries that aim at preventing crisis episodes should focus less on the choice of the ERR, and instead implement sound structural macroeconomic policies.

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  • Jean-Louis Combes & Alexandru Minea & Moussé Sow, 2016. "Crises and exchange rate regimes: time to break down the bipolar view?," Applied Economics, Taylor & Francis Journals, vol. 48(46), pages 4393-4409, October.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:46:p:4393-4409
    DOI: 10.1080/00036846.2016.1158917
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    Cited by:

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    2. Mohammad Karimi & Marcel‐Cristian Voia, 2019. "Empirics of currency crises: A duration analysis approach," Review of Financial Economics, John Wiley & Sons, vol. 37(3), pages 428-449, July.
    3. Levieuge, Grégory & Lucotte, Yannick & Pradines-Jobet, Florian, 2021. "The cost of banking crises: Does the policy framework matter?," Journal of International Money and Finance, Elsevier, vol. 110(C).
    4. Cruz-Rodríguez, Alexis, 2016. "Exchange Arrangements and Speculative Attacks: Is there a link?," MPRA Paper 72359, University Library of Munich, Germany.
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    6. Jurek Michał, 2018. "Choosing the exchange rate regime–a case for intermediate regimes for emerging and developing economies," Economics and Business Review, Sciendo, vol. 4(4), pages 46-63, November.
    7. Klaus Schmidt-Hebbel, 2019. "Macroeconomic Institutions: Lessons from World Experience for MENA Countries," Working Papers 1311, Economic Research Forum, revised 21 Aug 2019.

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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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