We extend the sudden stops literature by allowing crisis episodes to be caused by either the retreat of global investors, as is assumed but not shown in the extant literature, or the sudden flight of local investors. We find that almost half of the previously defined sudden stops are actually episodes of sudden flight. Compared to sudden flight, true sudden stops are bunched and are associated with greater slowdowns in economic activity and sharper currency depreciations. We show that the empirical regularities of sudden flight and true sudden stops are consistent with theoretical models that incorporate gross capital flows and information asymmetries.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12726.
Length: Date of creation: Dec 2006 Date of revision: Handle: RePEc:nbr:nberwo:12726
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Find related papers by JEL classification: F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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References listed on IDEAS 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.:
Barry Eichengreen & Pipat Luengnaruemitchai, 2006.
"Why doesn’t Asia have bigger bond markets?,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), Asian bond markets: issues and prospects, volume 30, pages 40-77
Bank for International Settlements.
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