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Managing Sudden Stops

In: Monetary Policy and Global Spillovers: Mechanisms, Effects and Policy Measures

Author

Listed:
  • Barry Eichengreen

    (University of California)

  • Poonam Gupta

    (World Bank)

Abstract

The recent reversal of capital flows to emerging markets has pointed up the continuing relevance of the sudden stop problem. This paper analyzes the sudden stops in capital flows to emerging markets since 1991. It shows that the frequency and duration of sudden stops have remained largely unchanged, but that the relative importance of different factors in their incidence has changed. In particular, global factors appear to have become more important relative to country-specific characteristics and policies. Sudden stops now tend to affect different parts of the world simultaneously rather than bunching regionally. Stronger macroeconomic and financial frameworks have allowed policy makers to respond more flexibly, but these more flexible responses have not guaranteed insulation or mitigated the impact of the phenomenon. These findings suggest that the challenge of understanding and coping with capital-flow volatility is far from fully met.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Barry Eichengreen & Poonam Gupta, 2018. "Managing Sudden Stops," Central Banking, Analysis, and Economic Policies Book Series,in: Enrique G. Mendoza & Ernesto Pastén & Diego Saravia (ed.), Monetary Policy and Global Spillovers: Mechanisms, Effects and Policy Measures, edition 1, volume 25, chapter 2, pages 009-047 Central Bank of Chile.
  • Handle: RePEc:chb:bcchsb:v25c02pp009-047
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    References listed on IDEAS

    as
    1. Forbes, Kristin J. & Warnock, Francis E., 2012. "Capital flow waves: Surges, stops, flight, and retrenchment," Journal of International Economics, Elsevier, vol. 88(2), pages 235-251.
    2. Cavallo, Eduardo & Powell, Andrew & Pedemonte, Mathieu & Tavella, Pilar, 2015. "A new taxonomy of Sudden Stops: Which Sudden Stops should countries be most concerned about?," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 47-70.
    3. Philip R. Lane & Jay C. Shambaugh, 2010. "Financial Exchange Rates and International Currency Exposures," American Economic Review, American Economic Association, vol. 100(1), pages 518-540, March.
    4. Carlos A Vegh & Guillermo Vuletin, 2014. "The Road to Redemption: Policy Response to Crises in Latin America," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(4), pages 526-568, November.
    5. Guillermo A. Calvo & Alejandro Izquierdo & Luis-Fernando Mejía, 2004. "On the empirics of Sudden Stops: the relevance of balance-sheet effects," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
    6. Sebastian Edwards, 2004. "Financial Openness, Sudden Stops, and Current-Account Reversals," American Economic Review, American Economic Association, vol. 94(2), pages 59-64, May.
    7. Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2002. "Sudden Stops, the Real Exchange Rate and Fiscal Sustainability: Argentina's Lessons," IDB Publications (Working Papers) 1909, Inter-American Development Bank.
    8. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007. "The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970-2004," Journal of International Economics, Elsevier, vol. 73(2), pages 223-250, November.
    9. repec:eme:jfeppp:jfep-03-2017-0021 is not listed on IDEAS
    10. Cavallo, Eduardo A. & Frankel, Jeffrey A., 2008. "Does openness to trade make countries more vulnerable to sudden stops, or less? Using gravity to establish causality," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1430-1452, December.
    11. Cavallo, Eduardo & Powell, Andrew & Pedemonte, Mathieu & Tavella, Pilar, 2015. "A new taxonomy of Sudden Stops: Which Sudden Stops should countries be most concerned about?," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 47-70.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Sudden Stops: A Primer on Balance-of-Payments Crises
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2018-06-25 11:59:25

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    Cited by:

    1. Lorenzo Menna & Martin Tobal, 2018. "Financial and price stability in emerging markets: the role of the interest rate," BIS Working Papers 717, Bank for International Settlements.
    2. repec:eee:jimfin:v:83:y:2018:i:c:p:23-43 is not listed on IDEAS
    3. Agénor, Pierre-Richard & Alper, Koray & Pereira da Silva, Luiz, 2018. "External shocks, financial volatility and reserve requirements in an open economy," Journal of International Money and Finance, Elsevier, vol. 83(C), pages 23-43.
    4. repec:chb:bcchec:v:20:y:2017:i:2:p:090-127 is not listed on IDEAS
    5. Ibarra-Ramírez Raúl & Téllez León Elizabeth, 2017. "Are all types of capital flows driven by the same factors? Evidence from Mexico," Working Papers 2017-18, Banco de México.

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