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The dog that didn't bite: Sudden Stops in Emerging and Developing Economies during COVID-19

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  • Cavallo, Eduardo A.
  • Hernández, Juan M.
  • González Jaramillo, María José
  • Powell, Andrew

Abstract

Despite an initial reversal of capital inflows, the COVID-19 pandemic resulted in relatively mild impacts on net capital flows to Emerging and Developing Economies. In contrast to previous crises, gross capital inflows offset residents' outflows, resulting in modest required current account adjustments. Liquid international markets, access to official resources and sound fundamentals in several countries allowed for capital inflows, preventing the additional costs of widespread Sudden Stops during the pandemic. We demonstrate that a parsimonious empirical model is able to discriminate quite well, to show that those countries with weaker fundamentals suffered Sudden Stops in net flows.

Suggested Citation

  • Cavallo, Eduardo A. & Hernández, Juan M. & González Jaramillo, María José & Powell, Andrew, 2025. "The dog that didn't bite: Sudden Stops in Emerging and Developing Economies during COVID-19," Emerging Markets Review, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:ememar:v:65:y:2025:i:c:s1566014125000123
    DOI: 10.1016/j.ememar.2025.101263
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    References listed on IDEAS

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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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