Are consistent pegs really more prone to currency crises?

摘要

This paper empirically evaluates the treatment effect of consistent pegs (i.e., the policy that countries claim to have pegged regimes and actually adopt the announced pegged regimes) on the occurrence of currency crises to examine whether consistent pegs are indeed more prone to currency crises than other regimes. To estimate the treatment effect of consistent pegs properly, we must carefully control for the self-selection problem of regime adoption because a countryu27s exchange rate regime choice is non-random. We thus use matching estimators as a control for the self-selection problem. We find interesting and robust evidence that consistent pegs significantly decrease the probability of currency crises compared with other exchange rate policies.