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Title:Systemic sudden stops: The relevance of balance-sheet effects and financial integration PDF Logo
Authors:Calvo, Guillermo A.
Izquierdo, Alejandro
Mejía, Luis-Fernando
Issue Date:2008
Series/Report no.:Working paper // Inter-American Development Bank, Research Department 637
Abstract:Using a sample of 110 developed and developing countries for the period 1990-2004, this paper analyzes the characteristics of systemic sudden stops (3S) in capital flows and the relevance of balance-sheet effects in the likelihood of their materialization. A small supply of tradable goods relative to their domestic absorption - a proxy for potential changes in the real exchange rate - and large foreign-exchange denominated debts towards the domestic banking system are claimed to be key determinants of the probability of 3S, producing a balancesheet effect with non-linear impacts on the probability of 3S. While financial integration is up to a point associated with a higher likelihood of 3S, beyond that point financial integration is associated with a lower likelihood of 3S.
Subjects:Balance of Payments crisis
Sudden Stop
capital flows
dollarization
real exchange rate
balance sheet effects
current account reversal
JEL:F31
F32
F34
F41
Document Type:Working Paper
Appears in Collections:Research Department Working Papers, Inter-American Development Bank

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