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Surges and Sudden Stops of Capital Flows to Emerging Markets

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Sula, Ozan

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Abstract

A characteristic of many of the recent emerging market currency crises is a preceding surge in capital inflows and their reversals or ‘sudden stops’ during the crises. The empirical investigation of 38 emerging market economies between 1990 and 2003 reveals that a surge in capital inflows significantly increases the probability of a sudden stop. In addition, a surge accompanied by a high current account deficit or an appreciated real exchange rate is more likely to be associated with a sudden stop. The paper also finds that a surge that is dominated by private loans and portfolio flows rather than direct investment has a higher probability to end with a sudden stop.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 383.

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Date of creation: Jan 2006
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Handle: RePEc:pra:mprapa:383

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Related research
Keywords: Capital flows; Sudden stops; Surges in capital flows; Emerging Markets; private loans; portfolio flows; foreign direct investment;

Find related papers by JEL classification:
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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  4. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2003. "The Unholy Trinity of Financial Contagion," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 51-74, Fall. [Downloadable!] (restricted)
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  16. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July. [Downloadable!] (restricted)
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