Banking crises and exchange rate regimes - Is there a link?

By Ilker Domaç, María Soledad Martínez Pería. 2003

177 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/3175cbef733987dc9c61c6f0ece757234c0e0971

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Citations in the corpus

Finance, Financial Sector Policies, and Long-Run Growth (2008, background): “(2003) and Easterly and Levine (2003) focus on ethnic differences, instead.”
Exchange Rate Management and Crisis Susceptibility: A Reassessment (2014, unknown): “A number of studies have documented the higher propensity of banking crisis (Domaç and Peria, 2003; Ghosh, Gulde, and Wolf, 2003; Rogoff and others, 2004; Source: Anderson (2008), IMF’s AREAER and WEO databases.”
Cross-Country Empirical Studies of Systemic Bank Distress: A Survey (2005, background): “In contrast, Domaç and Martinez-Peria (2003) find that adopting a fixed exchange rate diminishes the likelihood of a banking crisis in developing countries.”