Can Financial Openness Help Avoid Currency Crises?

Garita, Gus and Zhou, Chen (2009): Can Financial Openness Help Avoid Currency Crises?

Abstract

By introducing the concept of conditional probability of joint failure (CPJF), and by proposing a new measure for the systemic impact of currency crises, we provide new insights into the different sources of currency crises. We conclude that financial openness helps to diminish the probability of a currency crisis even after controlling for the onset of a banking crisis, that systemic currency crises mainly exist regionally, and that monetary policy geared towards price stability reduces the probability of a currency crisis.

• Item Type: MPRA Paper
• Language: English
• Keywords: Systemic Crises, Systemic Impact, Exchange Market Pressure, Extreme Value Theory, Financial Openness.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C10 - General; F - International Economics > F1 - Trade > F15 - Economic Integration; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration

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