Evaluating the Treatment Effect of Hard Pegs: New Wine in Old Bottles

The purpose of this article is to investigate the average treatment effect of hard pegs. The innovation of the paper is to control for the sample selection bias. Using the unbalanced panel data of non-industrial countries, we find that, compared with non-hard-peg countries, hard-peg countries have s...

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Bibliographic Details
Published in:Open economies review 2023-09, Vol.34 (4), p.813-830
Main Authors: Lai, Zheng-Hao, Wu, Jyh-Lin
Format: Article
Language:English
Subjects:
Bias
Comparative studies
Development Economics
Economic Policy
Economics
Economics and Finance
European Integration
Foreign exchange rates
Industrialized nations
Inflation
Innovations
International Economics
Macroeconomics/Monetary Economics//Financial Economics
Monetary unions
Panel data
Research Article
Selection bias
Wines
Citations: Items that this one cites
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Summary:The purpose of this article is to investigate the average treatment effect of hard pegs. The innovation of the paper is to control for the sample selection bias. Using the unbalanced panel data of non-industrial countries, we find that, compared with non-hard-peg countries, hard-peg countries have significantly lower inflation, inflation volatility, output growth, and trade growth but have higher output growth volatility. For industrial countries, we find that the results are similar to those of non-industrial countries, except that hard pegs do not significantly reduce inflation and inflation volatility. Based on all countries, the treatment effect of hard pegs is qualitatively similar to those obtained from non-industrial countries. These results are robust to different matching methods.
ISSN:0923-7992
1573-708X
DOI:10.1007/s11079-022-09688-0