Sudden stops in emerging markets: How to minimize their impact on GDP?

José Osler Alzate Mahecha ()

No 10547, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: Since the beginning of the 1990s, capital flows to emerging markets soared to historically high levels. However, many countries suffered sudden stops in these capital flows. These sudden stops affected simultaneously several countries with different economic characteristics. Taking into account the sudden stop episodes that occurred after 1990, this work attempts to analyze in an empirical manner which characteristics and policies helped reduce the cost of the different crises on GDP. The countries with a lower level of external debt had a less costly crisis. Additionally, a countercyclical fiscal policy and the sale of international reserves to counter the domestic currency´s depreciation also helped reduce the cost of the sudden stops on output. On the other hand, the level of exports and the changes in the central bank´s interest rate did not have statistically significant effects.

Keywords: sudden stops; emerging markets; crisis costs on GDP; countercyclical policy (search for similar items in EconPapers)
JEL-codes: F32 F44 (search for similar items in EconPapers)
Pages: 36
Date: 2013-01-27
New Economics Papers: this item is included in nep-cba
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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:010547

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