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Country Risk and Capital Flow Reversals

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  • Assaf Razin
  • Efraim Sadka

Abstract

A financial crisis with a capital flow reversal occurs when a country shifts abruptly from a 'good' equilibrium with a low country-specific risk premium to a 'bad' equilibrium with a high country-specific risk premium and no foreign credit.

Suggested Citation

  • Assaf Razin & Efraim Sadka, 2001. "Country Risk and Capital Flow Reversals," NBER Working Papers 8171, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8171
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    References listed on IDEAS

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    1. Gordon, Roger H & Bovenberg, A Lans, 1996. "Why Is Capital So Immobile Internationally? Possible Explanations and Implications for Capital Income Taxation," American Economic Review, American Economic Association, vol. 86(5), pages 1057-1075, December.
    2. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
    3. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
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    Cited by:

    1. Hutchison, Michael M. & Noy, Ilan, 2006. "Sudden stops and the Mexican wave: Currency crises, capital flow reversals and output loss in emerging markets," Journal of Development Economics, Elsevier, vol. 79(1), pages 225-248, February.
    2. Patnaik, Ila & Shah, Ajay & Singh, Nirvikar, 2016. "Foreign Currency Borrowing by Indian Firms: Toward a New Policy Framework," India Policy Forum, National Council of Applied Economic Research, vol. 12(1), pages 139-186.
    3. Razin, Assaf & Sadka, Efraim, 2002. "A Brazilian Debt-Crisis Model," CEPR Discussion Papers 3541, C.E.P.R. Discussion Papers.
    4. Chigbu Ezeji E. & Ubah Chijindu Promise & Chigbu Uzoamaka S., 2015. "Impact of Capital Inflows on Economic Growth of Developing Countries," International Journal of Management Science and Business Administration, Inovatus Services Ltd., vol. 1(7), pages 7-21, June.
    5. Joaquim Andrade & Vladimir Teles, 2006. "An empirical model of the Brazilian country risk -- an extension of the beta country risk model," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1271-1278.
    6. Vladimir Teles & Joaquim Andrade, 2008. "Monetary policy and country risk," Applied Economics, Taylor & Francis Journals, vol. 40(15), pages 2021-2028.
    7. Assaf Razin & Efraim Sadka, 2002. "A Brazilian Debt-Crisis," NBER Working Papers 9160, National Bureau of Economic Research, Inc.
    8. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2007. "Currency Mismatches, Debt Intolerance, and the Original Sin: Why They Are Not the Same and Why It Matters," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, pages 121-170, National Bureau of Economic Research, Inc.
    9. Augusto de la Torre & Eduardo Levy Yeyati & Sergio L. Schmukler, 2003. "Living and Dying with Hard Pegs: The Rise and Fall of Argentina’s Currency Board," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 43-108, January.
    10. Hutchison, Michael M. & Noy, Ilan & Wang, Lidan, 2010. "Fiscal and monetary policies and the cost of sudden stops," Journal of International Money and Finance, Elsevier, vol. 29(6), pages 973-987, October.
    11. Piersanti, Giovanni, 2012. "The Macroeconomic Theory of Exchange Rate Crises," OUP Catalogue, Oxford University Press, number 9780199653126.
    12. Chimere Okechukwu Iheonu & Godfrey Ikechukwu Ihedimma & Matilda Chinonyerem Omenihu, 0. "A Pooled Mean Group Estimation of Capital Inflow and Growth in sub Saharan Africa," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 20(65), pages 105-121, September.
    13. Maurício Yoshinori Une & Marcelo Savino Portugal, 2005. "Fear of disruption: a model of Markov-switching regimes for the Brazilian country risk conditional volatility," Econometrics 0509005, University Library of Munich, Germany.
    14. Mario Coccia, 2004. "Analysis of country risk and taxonomic arrangement," CERIS Working Paper 200414, CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY.
    15. Assaf Razin & Efraim Sadka, 2003. "A Brazilian-Type Debt Crisis: Simple Analytics," NBER Working Papers 9606, National Bureau of Economic Research, Inc.

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    JEL classification:

    • F3 - International Economics - - International Finance

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