When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options
AbstractIn this paper we present evidence that capital account reversals have become more severe for emerging markets. Because policy options are limited in the midst of a capital market crisis and because so many countries have already had crises recently, we focus on some of the policies that could reduce the incidence of crises in the first place, or at least make the sudden stop problem less severe. In this regard, we consider the relative merits of capital controls and dollarization. We conclude that, while the evidence suggests that capital controls appear to influence the composition of flows skewing flows away from short maturities, such policies are not likely to be a long-run solution to the recurring problem of sudden capital flow reversals. Yet, because fear of floating, many emerging markets are likely to turn to increased reliance on controls. Dollarization would appear to have the edge as a more market-oriented option to ameliorate, if not eliminate, the sudden stop problem.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 6982.
Date of creation: 2000
Date of revision:
capital flows; crises; emerging markets; sudden stops;
Find related papers by JEL classification:
- F3 - International Economics - - International Finance
- F2 - International Economics - - International Factor Movements and International Business
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- La teorÃa austriaca del ciclo econÃ³mico y el âSudden Stopâ
by AdriÃ¡n Ravier in Punto de Vista Economico on 2013-08-16 03:57:52
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