EconPapers    
Economics at your fingertips  
 

Sudden stops and financial frictions: evidence from industry level data

Kevin Cowan () and Claudio Raddatz

No 5605, Policy Research Working Paper Series from The World Bank

Abstract: The nature of the microeconomic frictions that transform sudden stops in output collapses is not only of academic interest, but also crucial for the correct design of policy responses to prevent and address these episodes and the lack of evidence on this regard is an important shortcoming. This paper uses industry-level data in a sample of 45 developed and emerging countries and a differences-in-differences methodology to provide evidence of the role of financial frictions for the consequences of sudden stops. The results show that, consistently with financial frictions being important, industries that are more dependent on external finance decline significantly more during a sudden stop, especially in less financially developed countries. The results are robust to controlling for other possible mechanisms, including labor market frictions. The paper also provides results on the role of comparative advantage during sudden stops and on the usefulness of various policy responses to attenuate the consequences of these shocks.

Keywords: Debt Markets; Emerging Markets; Access to Finance; Currencies and Exchange Rates; Economic Theory&Research (search for similar items in EconPapers)
Date: 2011-03-01
New Economics Papers: this item is included in nep-ifn
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www-wds.worldbank.org/external/default/WDSC ... ered/PDF/WPS5605.pdf (application/pdf)

Related works:
Journal Article: Sudden stops and financial frictions: Evidence from industry-level data (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:5605

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().

 
Page updated 2021-06-13
Handle: RePEc:wbk:wbrwps:5605