Advanced Search
MyIDEAS: Login to save this paper or follow this series

Sudden Stops: Determinants and Output Effects in the First Era of Globalization, 1880-1913

Contents:

Author Info

  • Michael D. Bordo
  • Alberto F. Cavallo
  • Christopher M. Meissner

Abstract

Using a sample of 20 emerging countries from 1880 to 1913, we study the determinants and output effects of sudden stops in capital inflows during an era of intensified globalization. We find that higher levels of original sin (hard currency debt to total debt) and large current account deficits associated with reliance on foreign capital greatly increased the likelihood of experiencing a sudden stop. Trade openness and stronger commitment to the gold standard had the opposite effect. These results are robust for many sudden stop definitions used in the literature. Finally, we use a treatment effects model to show that after controlling for endogeneity sudden stops have a strong negative association with growth in per capita output. We also show that banking, currency and debt crises that were preceded by a sudden stop have much greater negative relation with growth than in the absence of a sudden stop.

Download Info

If 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.
File URL: http://www.nber.org/papers/w13489.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13489.

as in new window
Length:
Date of creation: Oct 2007
Date of revision:
Publication status: published as Bordo, Michael D. & Cavallo, Alberto F. & Meissner, Christopher M., 2010. "Sudden stops: Determinants and output effects in the first era of globalization, 1880-1913," Journal of Development Economics, Elsevier, vol. 91(2), pages 227-241, March.
Handle: RePEc:nbr:nberwo:13489

Note: DAE IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Hutchison, Michael M. & Noy, Ilan, 2004. "Sudden Stops and the Mexican Wave: Currency Crises, Capital Flow Reversals and Output Loss in Emerging Markets," Santa Cruz Center for International Economics, Working Paper Series, Center for International Economics, UC Santa Cruz qt38j2b036, Center for International Economics, UC Santa Cruz.
  2. Meissner, Christopher M & Taylor, Alan M, 2006. "Losing our Marbles in the New Century? The Great Rebalancing in Historical Perspective," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5917, C.E.P.R. Discussion Papers.
  3. Philippe Aghion & Philippe Bacchetta & Abhijit Banerjee, 1999. "A Simple Model of Monetary Pollicy and Currency Crises," Working Papers, Swiss National Bank, Study Center Gerzensee 99.05, Swiss National Bank, Study Center Gerzensee.
  4. Michael P. Dooley, 1997. "A Model of Crises in Emerging Markets," NBER Working Papers 6300, National Bureau of Economic Research, Inc.
  5. Romain Ranciere & Aaron Tornell & Frank Westermann, 2005. "Systemic Crises and Growth," CESifo Working Paper Series 1451, CESifo Group Munich.
  6. Ricardo Caballero & Kevin Cowan & Jonathan Kearns, 2005. "Fear of Sudden Stops: Lessons From Australia and Chile," Journal of Economic Policy Reform, Taylor & Francis Journals, Taylor & Francis Journals, vol. 8(4), pages 313-354.
  7. Bordo, Michael D., 2008. "Growing up to Financial Stability," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, Kiel Institute for the World Economy, vol. 2(12), pages 1-17.
  8. Olivier Jeanne, 2007. "International Reserves in Emerging Market Countries: Too Much of a Good Thing?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 38(1), pages 1-80.
  9. Barry Eichengreen & Michael D. Bordo, 2002. "Crises Now and Then: What Lessons from the Last Era of Financial Globalization," NBER Working Papers 8716, National Bureau of Economic Research, Inc.
  10. repec:rus:hseeco:124089 is not listed on IDEAS
  11. Luis Felipe Cespedes & Roberto Chang & Andres Velasco, 2000. "Balance Sheets and Exchange Rate Policy," NBER Working Papers 7840, National Bureau of Economic Research, Inc.
  12. Pablo E. Guidotti & Federico Sturzenegger & Agustín Villar, 2004. "On the Consequences of Sudden Stops," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  13. 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.
  14. Jeffrey A. Frankel & Eduardo A. Cavallo, 2004. "Does Openness to Trade Make Countries More Vulnerable to Sudden Stops, Or Less? Using Gravity to Establish Causality," NBER Working Papers 10957, National Bureau of Economic Research, Inc.
  15. Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals, and Sudden Stops," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 1-49, June.
  16. Maurice Obstfeld & Alan M. Taylor, 2002. "Sovereign Risk, Credibility and the Gold Standard: 1870-1913 versus 1925-31," NBER Working Papers 9345, National Bureau of Economic Research, Inc.
  17. Milesi-Ferretti, Gian Maria & Razin, Assaf, 1998. "Current Account Reversals and Currency Crises: Empirical Regularities," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1921, C.E.P.R. Discussion Papers.
  18. 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.
  19. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 373, July.
  20. Aguiar, Mark & Gopinath, Gita, 2007. "Emerging Market Business Cycles: The Cycle is the Trend," Scholarly Articles 11988098, Harvard University Department of Economics.
  21. Muge Adalet & Barry Eichengreen, 2007. "Current Account Reversals: Always a Problem?," NBER Chapters, National Bureau of Economic Research, Inc, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 205-246 National Bureau of Economic Research, Inc.
  22. Christopher M Meissner & Michael D Bordo, 2006. "Financial Crises, 1880-1913: The Role of Foreign Currency Debt," WEF Working Papers, ESRC World Economy and Finance Research Programme, Birkbeck, University of London 0002, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  23. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 329-368.
  24. Sebastian Edwards, 2005. "Capital Controls, Sudden Stops and Current Account Reversals," NBER Working Papers 11170, National Bureau of Economic Research, Inc.
  25. Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals and Sudden Stops," NBER Working Papers 10276, National Bureau of Economic Research, Inc.
  26. Hugh Rockoff & Michael D. Bordo, 1996. "The Gold Standard as a "Good Housekeeping Seal of Approval"," Departmental Working Papers, Rutgers University, Department of Economics 199528, Rutgers University, Department of Economics.
  27. Bordo Michael D. & Kydland Finn E., 1995. "The Gold Standard As a Rule: An Essay in Exploration," Explorations in Economic History, Elsevier, Elsevier, vol. 32(4), pages 423-464, October.
  28. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2005. "Sudden Stops and Output Drops," Levine's Bibliography 122247000000000880, UCLA Department of Economics.
  29. Sebastian Edwards, 2004. "Financial Openness, Sudden Stops, and Current-Account Reversals," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 59-64, May.
  30. Luis A. V. Cat�o & Solomos N. Solomou, 2005. "Effective Exchange Rates and the Classical Gold Standard Adjustment," American Economic Review, American Economic Association, American Economic Association, vol. 95(4), pages 1259-1275, September.
  31. Assaf Razin & Yona Rubinstein, 2006. "Evaluation of currency regimes: the unique role of sudden stops," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 21(45), pages 119-152, 01.
  32. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
  33. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
  34. Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2006. "Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crises," NBER Working Papers 12101, National Bureau of Economic Research, Inc.
  35. Romain Ranciere & Aaron Tornell & Frank Westermann, 2006. "Decomposing the Effects of Financial Liberalization: Crises vs. Growth," Working Papers, Institute of Empirical Economic Research 74, Institute of Empirical Economic Research.
  36. Guillermo A. Calvo & Ernesto Talvi, 2005. "Sudden Stop, Financial Factors and Economic Collpase in Latin America: Learning from Argentina and Chile," NBER Working Papers 11153, National Bureau of Economic Research, Inc.
  37. Michael D. Bordo, 2006. "Sudden Stops, Financial Crises, and Original Sin in Emerging Countries: Déjà vu?," NBER Working Papers 12393, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:13489. See general 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: ().

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.