Banking Crises and Exchange Rate Regimes : Is There a Link?

Published
2000-11
Journal
1Metadata
Abstract
The authors investigate the links between banking crises, and exchange rate regimes, using a comprehensive data set that includes developed, and developing countries over the last two decades. In particular, they examine whether the choice of exchange rate regime affects the likelihood, cost, and duration of banking crises. Empirical results indicate that adopting a fixed exchange rate, diminishes the likelihood of a banking crisis in developing countries. But once a banking crisis occurs, its real costs - in terms of forgone output growth - are higher for countries with more stringent exchange rate requirements. The duration of crises seems not to be affected by exchange rate policy. Instead, it is influenced mainly by the size of the credit boom before the crisis.Citation
“Domac, Ilker; Martinez Peria, Maria Soledad. 2000. Banking Crises and Exchange Rate Regimes : Is There a Link?. Policy Research Working Paper;No. 2489. World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/19778 License: CC BY 3.0 IGO.”
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