Institutions, expectations, and currency crises

David Leblang, Shanker Satyanath

    Research output: Contribution to journalArticlepeer-review

    Abstract

    Currency crises are costly phenomena that have been exceptionally difficult to explain and predict. We comprehensively examine the relationship between political institutions and currency crises and emphasize the causal linkage between institutions, expectations, and crises. Specifically, we argue that institutional variables - particularly divided government and government turnover - increase the variance of expectations held by speculators thereby increasing the likelihood of currency crises. We test these hypotheses using three existing economic models of currency crises and find that institutional variables are not only statistically significant, but also substantially improve the ability of these models to forecast crises.

    Original languageEnglish (US)
    Pages (from-to)245-262
    Number of pages18
    JournalInternational Organization
    Volume60
    Issue number1
    DOIs
    StatePublished - Jan 2006

    ASJC Scopus subject areas

    • Sociology and Political Science
    • Political Science and International Relations
    • Organizational Behavior and Human Resource Management
    • Law

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