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An event study of institutions and currency crises
Author(s) -
Shimpalee Pattama L.,
Breuer Janice Boucher
Publication year - 2006
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2006.06.002
Subject(s) - language change , currency , bureaucracy , currency crisis , order (exchange) , economics , government (linguistics) , event study , quality (philosophy) , monetary economics , development economics , international economics , business , political science , finance , geography , law , art , linguistics , philosophy , context (archaeology) , literature , archaeology , epistemology , politics
We use event study methodology to examine the behavior of seven institutional variables eighteen months prior to and after a currency crisis. Our data on institutions include bureaucratic quality, corruption, ethnic tensions, external conflict, internal conflict, government stability, and law and order over the period 1984–2002. Our country coverage includes forty industrial, emerging market, and developing economies for various regions of the world. The graphical event study shows that there are many instances where institutions are weaker in periods before and after a currency crisis than during tranquil periods. The evidence is most compelling for government stability, law and order, bureaucratic quality, and corruption. We also test for differences in the mean values of institutional variables in turbulent periods around a crisis event and tranquil, non‐crisis periods. Results from our tests generally complement evidence from the event study.