Crises and Exchange Rate Regimes: Time to break down the bipolar view?

Jean-Louis Combes (1) , Alexandru Minea (1) , Mousse Ndoye Sow (1)

1 CERDI - Centre d'Études et de Recherches sur le Développement International

We revisit the link between crises and exchange rate regimes (ERR). Using a 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.

Keywords: exchange rate regimes; economic crises; bipolar view

Domains: Economics and Finance

Jean-Louis Combes, Alexandru Minea, Mousse Ndoye Sow. Crises and Exchange Rate Regimes: Time to break down the bipolar view?. 2014. ⟨halshs-00944372v1⟩