Systemic Sudden Stops: The Relevance of Balance-Sheet Effects and Financial Integration

Guillermo Calvo, Alejandro Izquierdo and Luis Fernando Mejía

No 1628, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Using a sample of 110 developed and developing countries for the period 1990-2004, this paper analyzes the characteristics of systemic sudden stops (3S) in capital flows and the relevance of balance-sheet effects in the likelihood of their materialization. A small supply of tradable goods relative to their domestic absorption?a proxy for potential changes in the real exchange rate?and large foreign-exchange denominated debts towards the domestic banking system are claimed to be key determinants of the probability of 3S, producing a balancesheet effect with non-linear impacts on the probability of 3S. While financial integration is up to a point associated with a higher likelihood of 3S, beyond that point financial integration is associated with a lower likelihood of 3S.

Keywords: WP-637 (search for similar items in EconPapers)
JEL-codes: F31 F32 F34 F41 (search for similar items in EconPapers)
Date: 2008-07
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Citations: View citations in EconPapers (51)

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Related works:
Working Paper: Systemic Sudden Stops: The Relevance of Balance-Sheet Effects and Financial Integration (2008)
Working Paper: Systemic Sudden Stops: The Relevance Of Balance-Sheet Effects And Financial Integration (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:1628

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