Do hard pegs avoid currency crises? An evaluation using matching estimators

Using the bias-corrected matching estimators of Abadie and Imbens (2006) as a control for the self-selection problem of regime adoption, we estimate the average treatment effect of hard pegs on the occurrence of currency crises. We find the evidence that hard pegs significantly decrease the likelihood of currency crises compared with other regimes.

► We examine the effect of hard pegs on the occurrence of currency crises. ► We use covariate matching to address the self-selection problem of regime adoption. ► Hard pegs decrease the likelihood of currency crises compared with other regimes.