On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects

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dc.creator Calvo, Guillermo A.
dc.creator Izquierdo, Alejandro
dc.creator Mejía, Luis Fernando
dc.date 2011-02-04T21:23:16Z
dc.date 2011-02-04T21:23:16Z
dc.date 2004-07-01
dc.date 2004-07-01
dc.date 2014-08-29T09:18:57Z
dc.date.accessioned 2014-09-08T23:27:27Z
dc.date.available 2014-09-08T23:27:27Z
dc.date.issued 2014-09-08
dc.identifier http://www.iadb.org/en/publications/publication-detail,7101.html?id=6304
dc.identifier.uri https://saber.ucab.edu.ve/xmlui/handle/123456789/15680
dc.description Using a sample of 32 developed and developing countries we analyze the empirical characteristics of Sudden Stops in capital flows and the relevance of balance-sheet effects in the likelihood of their occurrence. We find that large real exchange rate (RER) fluctuations accompanied by Sudden Stops are basically an emerging market (EM) phenomenon. Sudden Stops seem to come in bunches, grouping together countries that are different in many respects. However, countries are similar in that they remain vulnerable to large RER fluctuations. This may be the case because countries are forced to make large adjustments in the absorption of tradable goods, and/or because the size of dollar liabilities in the banking system (i.e., domestic liability dollarization, or DLD) is large. Openness, understood as a large supply of tradable goods that reduces leverage over the current account deficit, in combination with DLD, is a key determinant of the probability of Sudden Stops. The relationship between Openness and DLD in the determination of the probability of Sudden Stops is highly non-linear, implying that the interaction of high current account leverage and high dollarization may be a dangerous cocktail.
dc.format ACROBAT
dc.language en
dc.relation IDB Working Paper Series
dc.subject Setor Financeiro
dc.subject Financial Sector
dc.subject Sector financiero
dc.subject Economia
dc.subject Economics
dc.subject Economía
dc.subject WP-509
dc.title On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects
dc.type Working Papers

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