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Intolerable Surges, Exchange Rate Regimes and Sudden Stops of Capital Inflows

In: European Integration Process in Western Balkan Countries

Author

Listed:
  • Ayachi Feith

    (High School of Economics and Trade of Tunis, Department of Economics, Tunisia)

  • Bhar Youssef

    (Faculty of Economics and Management, Tunisia)

Abstract

This chapter investigates the effect of the exchange regime on the likelihood of sudden stops. A panel probit analysis is conducted on the data of 43 developing countries from 1980 to 2010. The test investigates the interaction of surges and the exchange regime and their potential impact of the sudden stops of capital inflow. Results support the hypothesis that the peg regimes increase the probability of sudden stops. In addition the surges accompanied by the fixed regime are more likely to be associated with a sudden stop. The principle result of this test is that the crisis of sudden stops is more predictable in the case of the flexible exchange regime than in the peg regimes.

Suggested Citation

  • Ayachi Feith & Bhar Youssef, 2012. "Intolerable Surges, Exchange Rate Regimes and Sudden Stops of Capital Inflows," Book Chapters, in: Paulino Teixeira & António Portugal Duarte & Srdjan Redzepagic & Dejan Eric (ed.), European Integration Process in Western Balkan Countries, edition 1, volume 1, chapter 9, pages 178-191, Institute of Economic Sciences.
    • Handle: RePEc:ibg:chaptr:euinpro-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital flows; sudden stops; surges in capital flows; exchange rate regime; and financial integration current account reversal;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G01 - Financial Economics - - General - - - Financial Crises

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