The Dog That Didn't Bite: Sudden Stops in Emerging and Developing Countries During COVID-19

Eduardo Cavallo, Juan Hernández, María José González Jaramillo and Andrew Powell

No 13133, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Despite an initial reversal of capital inflows, the COVID-19 pandemic resulted in relatively mild impacts on net capital flows to Emerging and Developing Economies. In contrast to previous crises, gross capital inflows offset residents' outflows, resulting in relatively stable net capital flows and modest current account adjustments. Liquid international markets, access to official resources, and sound fundamentals allowed for capital inflows, thus preventing the additional costs of widespread Sudden Stops during the pandemic. Still, we show a relatively simple model predicted Sudden Stops in net flows reasonably well in countries with weaker fundamentals.

Keywords: Sudden stops; Capital flows; balance of payments; Capital Account; COVID-19; Emerging and Developing Economies (search for similar items in EconPapers)
JEL-codes: F30 F32 F40 (search for similar items in EconPapers)
Date: 2023-10
New Economics Papers: this item is included in nep-dev and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:13133

DOI: 10.18235/0005177

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