A New Taxonomy of Sudden Stops: Which Sudden Stops Should Countries Be Most Concerned About?

Eduardo Cavallo, Andrew Powell, Mathieu Pedemonte and Pilar Tavella

No IDB-WP-430, Research Department Publications from Inter-American Development Bank, Research Department

Abstract: This paper proposes a new taxonomy of Sudden Stops comprised of seven categories with definitions depending on the behavior of gross and net capital flows. The incidence of different types of Sudden Stops is tracked over time and the type of Sudden Stop related to economic performance. Sudden Stops in Net Flows associated with reductions in Gross Inflows are more disruptive than those where surges in (only) Gross Outflows dominate. The paper further discusses the mechanisms that might result in Sudden Stops in Gross Flows that are not Sudden Stops in Net Flows, such that shifts in financial assets or liabilities do not require a sharp current account adjustment. Still, it is found that Sudden Stops in Gross Inflows that do not provoke a sharp contraction in Net Flows may also be disruptive, including Sudden Stops that are driven by 'other flows' -which include banking flows. The results suggest new avenues for research and future policy analysis.

JEL-codes: F30 F32 F40 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-opm
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Citations: View citations in EconPapers (38)

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Related works:
Journal Article: A new taxonomy of Sudden Stops: Which Sudden Stops should countries be most concerned about? (2015)
Working Paper: A New Taxonomy of Sudden Stops: Which Sudden Stops Should Countries Be Most Concerned About? (2013)
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