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The Duration of Capital Account Crises

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  • David Hofman
  • Ruben Atoyan
  • Dimitri Tzanninis
  • Mauro Mecagni
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    Abstract

    This paper examines the duration of capital account crises. We develop a new index to identify both the start and the end of these crises. Applying the index to a sample of 18 crisis episodes, we derive stylized facts on crisis duration and review the economic and financial circumstances that prevailed at the dusk of crises, a relatively unexplored area. We use the econometric technique of duration analysis to gauge the relative importance of various factors affecting the probability of exiting a crisis. We find that initial and external conditions are key determinants. But fiscal and monetary policies can also help shorten crisis duration.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/258.

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    Length: 42
    Date of creation: 01 Nov 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/258

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    References

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    1. Demirguc-Kunt, Asli & Detragiache, Enrica, 2005. "Cross-country empirical studies of systemic bank distress : a survey," Policy Research Working Paper Series 3719, The World Bank.
    2. Sebastian Edwards, 2007. "Capital Controls, Sudden Stops, and Current Account Reversals," NBER Chapters, National Bureau of Economic Research, Inc, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 73-120 National Bureau of Economic Research, Inc.
    3. Marc Klau & John Hawkins, 2000. "Measuring potential vulnerabilities in emerging market economies," BIS Working Papers 91, Bank for International Settlements.
    4. Graciela L. Kaminsky, 2003. "Varieties of Currency Crises," NBER Working Papers 10193, National Bureau of Economic Research, Inc.
    5. Michael M. Hutchison & Ilan Noy, . "Sudden Stops and the Mexican Wave: Currency Crises, Capital Flow Reversals and Output Loss in Emerging Markets," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 02-12, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    6. Eduardo A. Cavallo & Jeffrey Frankel, 2007. "Does Openness to Trade Make Countries More Vulnerable to Sudden Stops, or Less? Using Gravity to Establish Causality," Research Department Publications, Inter-American Development Bank, Research Department 4544, Inter-American Development Bank, Research Department.
    7. Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2006. "Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crises," Research Department Publications, Inter-American Development Bank, Research Department 4474, Inter-American Development Bank, Research Department.
    8. Guillermo A. Calvo, 2008. "Crises in Emerging Markets Economies: A Global Perspective," Central Banking, Analysis, and Economic Policies Book Series, Central Bank of Chile, in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmid (ed.), Current Account and External Financing, edition 1, volume 12, chapter 3, pages 085-115 Central Bank of Chile.
    9. Marcos Chamon & Paolo Manasse & Alessandro Prati, 2007. "Can We Predict the Next Capital Account Crisis?," IMF Staff Papers, Palgrave Macmillan, vol. 54(2), pages 270-305, June.
    10. Ales Bulir & Marianne Schulze-Gattas & Atish R. Ghosh & Alex Mourmouras & A. Javier Hamann & Timothy D. Lane, 2002. "IMF-Supported Programs in Capital Account Crises," IMF Occasional Papers 210, International Monetary Fund.
    11. Barry Eichengreen & Poonam Gupta & Ashoka Mody, 2006. "Sudden Stops and IMF-Supported Programs," NBER Working Papers 12235, National Bureau of Economic Research, Inc.
    12. Guillermo A. Calvo & Alejandro Izquierdo & Luis Fernando Mejía, 2004. "On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects," IDB Publications 6516, Inter-American Development Bank.
    13. Barry J. Eichengreen & Inci Ötker & A. Javier Hamann & Esteban Jadresic & R. B. Johnston & Hugh Bredenkamp & Paul R. Masson, 1998. "Exit Strategies," IMF Occasional Papers 168, International Monetary Fund.
    14. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, American Economic Association, vol. 89(3), pages 473-500, June.
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    Cited by:
    1. Calderon, Cesar & Kubota, Megumi, 2011. "Sudden stops : are global and local investors alike ?," Policy Research Working Paper Series 5569, The World Bank.
    2. Wälti, Sébastien & Weder, Ghislaine, 2009. "Recovering from bond market distress: Good luck and good policy," Emerging Markets Review, Elsevier, Elsevier, vol. 10(1), pages 36-50, March.

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