Home » Global Volatility and Forex Returns in East Asia by Sanjay Kalra
Global Volatility and Forex Returns in East Asia Sanjay Kalra

Global Volatility and Forex Returns in East Asia

Sanjay Kalra

Published December 31st 2005
ISBN : 9781282841598
ebook
31 pages
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 About the Book 

A common legacy of banking crises is a large increase in government debt, as fiscal resources are used to shore up the banking system. Do crisis response strategies that commit more fiscal resources lower the economic costs of crises? Based onMoreA common legacy of banking crises is a large increase in government debt, as fiscal resources are used to shore up the banking system. Do crisis response strategies that commit more fiscal resources lower the economic costs of crises? Based on evidence from a sample of 40 banking crises we find that the answer is negative. In fact, policies that are riskier for the government budget are associated with worse, not better, post-crisis performance. We also show that parliamentary political systems are more prone to adopt bank rescue measures that are costly for the government budget. We take advantage of this relationship to instrument the policy response, thereby addressing concerns of joint endogeneity. We find no evidence that endogeneity is a source of bias.