Financial Diversification, Sudden Stops, and Sudden Starts
In: Current Account and External Financing
AbstractThe recent literature on sudden stops is based on the fact that many emerging market economies experience recurrent and sharp capital account reversals. In this paper we argue, as some recent research has started to emphasize, that more information can be obtained by looking at gross rather than net flows. Economies may be curtailed from international financial markets, resulting in a sudden stop of inflows, but others may be experiencing portfolio shifts that cause sudden start of capital outflows. By looking at gross flows, and comparing emerging markets (EMEs) with developed economies (DEs) we indeed show that there is a variety of experiences that cannot be lumped together. In particular, sudden stop of inflows are as common in DEs as in EMEs, but a key difference is that in the former outflows and inflows are negatively correlated, which dampen the reversal of net flows. We present a model of financial diversification to interpret these results which is consistent with most evidence we report here. l II) could be helpful on this task.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
This chapter was published in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.) Current Account and External Financing, , chapter 5, pages 159-194, 2008.
This item is provided by Central Bank of Chile in its series Central Banking, Analysis, and Economic Policies Book Series with number v12c05pp159-194.
Other versions of this item:
- Kevin Cowan & Jose De Gregorio & Alejandro Micco & Christopher Neilson, 2007. "Financial Diversification, Sudden Stops and Sudden Starts," Working Papers Central Bank of Chile, Central Bank of Chile 423, Central Bank of Chile.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alicia Garcia-Herrero & Alvaro Ortiz, 2006. "The Role of Global Risk Aversion in Explaining Sovereign Spreads," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
- Mark Aguiar & Gita Gopinath, 2007.
"Emerging Market Business Cycles: The Cycle Is the Trend,"
Journal of Political Economy, University of Chicago Press,
University of Chicago Press, vol. 115, pages 69-102.
- Mark Aguiar & Gita Gopinath, 2004. "Emerging market business cycles: the cycle is the trend," Working Papers, Federal Reserve Bank of Boston 04-4, Federal Reserve Bank of Boston.
- Mark Aguiar & Gita Gopinath, 2004. "Emerging Market Business Cycles: The Cycle is the Trend," NBER Working Papers 10734, National Bureau of Economic Research, Inc.
- Aguiar, Mark & Gopinath, Gita, 2007. "Emerging Market Business Cycles: The Cycle is the Trend," Scholarly Articles 11988098, Harvard University Department of Economics.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Sepulveda).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.