Trade, Gravity and Sudden Stops: On How Commercial Trade Can Increase the Stability of Capital Flows

Eduardo Cavallo

No 1945, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Financial stability is an important policy objective, since crises are associated with large economic, social and political costs. This paper contributes to the discussion by providing new theoretical and empirical evidence on the causal connection between lack of exposure to commercial trade and proclivity to sudden stops. On the theoretical front, the paper shows how exposure to trade raises the creditworthiness of countries and reduces the probability of sudden stops.

Keywords: WP-588 (search for similar items in EconPapers)
Date: 2006-12
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Trade, Gravity and Sudden Stops: On How Commercial Trade Can Increase the Stability of Capital Flows (2006)
Working Paper: Trade, gravity, and sudden stops: on how commercial trade can increase the stability of capital flows (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:1945

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