IDEAS home Printed from
   My bibliography  Save this article

On the Consequences of Sudden Stops


  • Pablo E. Guidotti
  • Federico Sturzenegger
  • Agustín Villar


Our analysis shows a number of interesting empirical regularities. First, when we apply a simple definition of sudden stops, we find that they have been a fairly common occurrence at least since the late 1970s. Second, economic performance after a sudden stop can differ dramatically across countries, depending on certain country characteristics. We show that open economies and those that choose a floating exchange rate regime after a crisis recover fairly quickly from the output contraction that usually comes with the sudden stop, whereas countries with liability dollarization recover more slowly. These characteristics relate to how the economies adjust exports and imports during the aftermath of a sudden stop. Open economies that do not show much liability dollarization tend to show higher export growth and less import contraction than highly dollarized economies. The paper is organized as follows. The next section discusses our definition of sudden stops. We then examine the stylized facts associated with sudden stops, including their regional coverage and evolution over time. A subsequent section proceeds to identify the key factors that explain the nature of the aftermath of a sudden stop in capital flows. If sudden stops remain a recurrent feature of emerging market economies in years to come, the issue of how to ensure a quick return of growth in the aftermath of a crisis will require attention. Policy recommendations focused on improving such ex post performance should go hand in hand with traditional prevention measures designed to avoid the crises. We elaborate on these conclusions in the final section.

Suggested Citation

  • Pablo E. Guidotti & Federico Sturzenegger & Agustín Villar, 2004. "On the Consequences of Sudden Stops," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 171-214, January.
  • Handle: RePEc:col:000425:008672

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Sudden stops; economirc recovery; dollarization; adjustment mechanisms;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:col:000425:008672. 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: . General contact details of provider: .

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LACEA (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.