Systemic Sudden Stops: The Relevance of Balance-Sheet Effects and Financial Integration

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.

Bibliographic Details

Main Author:	Inter-American Development Bank
Other Authors:	Guillermo A. Calvo
Format:	Working Papers biblioteca
Language:	English
Published:	Inter-American Development Bank
Subjects:	Financial Crisis and Structural Adjustement, Financial Sector, F31 - Foreign Exchange, F32 - Current Account Adjustment • Short-Term Capital Movements, F34 - International Lending and Debt Problems, F41 - Open Economy Macroeconomics, WP-637,
Online Access:	http://dx.doi.org/10.18235/0010895 https://publications.iadb.org/en/systemic-sudden-stops-relevance-balance-sheet-effects-and-financial-integration
Tags:	Add Tag No Tags, Be the first to tag this record!