Currency Crises, Capital-Account Liberalization, and Selection Bias

Reuven Glick; Xueyan Guo; Michael M. Hutchison

doi:10.1162/rest.88.4.698

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Currency Crises, Capital-Account Liberalization, and Selection Bias

Reuven Glick¹; Xueyan Guo²; Michael M. Hutchison²

¹ Federal Reserve Bank of San Francisco · ² University of California, Santa Cruz

The Review of Economics and Statistics 2006 open access

Are countries with unregulated capital flows more vulnerable to currency crises? Efforts to answer this question properly must control for self-selection bias, because countries with liberalized capital accounts may also have sounder economic policies and institutions that make them less likely to experience crises. We employ a matching and propensity-score methodology to address this issue in a panel analysis of developing countries. Our results suggest that, after controlling for sample selection bias, countries with liberalized capital accounts experience a lower likelihood of currency crises.

DOI: 10.1162/rest.88.4.698
Volume: 88 (4)
Pages: 698-714
Language: en
Export: BibTeX
Sources: crossref openalex