Asset bubbles and sudden stops in a small open economy

Alberto Martin and Jaume Ventura ()
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Jaume Ventura: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3418977

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We live in a new world economy characterized by financial globalization and historically low interest rates. This paper presents a simple analytical framework that helps us understand how this new world economy works from the perspective of an emerging economy. Financial globalization gives rise to episodes of large capital inflows followed by sudden stops. Low international interest rates give rise to asset bubbles that pop and burst. The analysis provides novel answers to old questions: What are the effects of asset bubbles on capital flows and macroeconomic performance? How do these effects vary in normal times and during sudden stops? How should policymakers manage capital flows in this new environment?

Keywords: financial globalization; international capital flows; sudden stops; asset bubbles; capital controls. (search for similar items in EconPapers)
JEL-codes: E32 E44 O40 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-mac and nep-opm
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Related works:
Chapter: Asset Bubbles and Sudden Stops in a Small Open Economy (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1466

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