Capital Inflow Surges in Emerging Economies: How Worried Should Latin America and the Caribbean Be?

Andrew Powell and Pilar Tavella ()

Economía Journal, 2015, vol. Volume 15 Number 2, issue Spring 2015, 1-37

Abstract: This paper analyzes capital inflow surges to emerging economies. Probit models estimated on the period 1980-2005 discriminate well between surges associated with banking crises or recessions, and those that end without such events. The composition of inflows and the extent of financial reform are significant determinants of outcomes. Applying the models to LAC we find relatively high estimated probabilities for recessions and lower probabilities for banking crises for post- 2005 surges. While there were no financial crises in LAC 7 countries, some surges may have contributed to the slowdown in growth. Our results constitute a prima-facie case for macro- prudential interventions.

Keywords: Capital flows; Banking crisis; Financial crisis; Probit (search for similar items in EconPapers)
JEL-codes: C25 E44 F34 G01 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000425:012568

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