Banking crises and exchange rate regimes: is there a link? |
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Authors: | Ilker Domaç |
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Affiliation: | a Central Bank of Turkey, Istikal Cad. No: 10, Ulus, Ankara 06100 Turkey b The World Bank, 1818 H St. N.W., MSN MC 3-300, Washington, DC 20433, USA |
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Abstract: | This paper investigates the linkages between banking crises and exchange rate regimes, using a comprehensive cross-country dataset for the last two decades. The paper examines whether the choice of exchange rate regime affects the likelihood, cost, and duration of banking crises. Empirical results seem to indicate that adopting a fixed exchange rate diminishes the likelihood of banking crises among developing countries. However, once crises occur, the real costs associated with them appear to be larger in countries with fixed exchange rates. The duration of crises does not seem to be robustly affected by the exchange rate policy. |
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Keywords: | Banking crises and exchange rate regimes |
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