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Surges and Sudden Stops of Capital Flows to Emerging Markets

  • Ozan Sula

    ()

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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File URL: http://hdl.handle.net/10.1007/s11079-008-9103-7
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 21 (2010)
Issue (Month): 4 (September)
Pages: 589-605

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Handle: RePEc:kap:openec:v:21:y:2010:i:4:p:589-605
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