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Determinantes e Impacto de Episodios de Reversión Abrupta de Flujos de Capitales: ¿Es Distinto un Sudden Stop de un Sudden Flight?

  • Gabriela Contreras
  • Alfredo Pistelli
  • Mariel Siravegna

This paper provides evidence on the importance of distinguishing among episodes of capital flow reversals driven by stop or reversal of gross capital inflows (sudden stops) and those explained by large surges in gross capital outflows (sudden flights). Besides finding that they have different economic effects, we find that their probability of occurrence depends on different factors. For robustness, we consider alternative methodologies for identifying reversal episodes, which seems important given the differences in incidence between identification criteria. Overall, sudden flight episodes have less economic impact than sudden stop episodes. The probability of occurrence of a sudden stop in capital inflows increases in countries that face negative external shocks, capital bonanzas or high dependence on external financing. Meanwhile, unlike sudden stop episodes, we did not find robust and statistically significant risk factors in the case of sudden flight episodes.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 665.

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Date of creation: Mar 2012
Date of revision:
Handle: RePEc:chb:bcchwp:665
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  1. Sula, Ozan, 2006. "Surges and Sudden Stops of Capital Flows to Emerging Markets," MPRA Paper 383, University Library of Munich, Germany.
  2. Chinn, Menzie David & Ito, Hiro, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," Santa Cruz Department of Economics, Working Paper Series qt5pv1j341, Department of Economics, UC Santa Cruz.
  3. Agosin, Manuel R. & Huaita, Franklin, 2012. "Overreaction in capital flows to emerging markets: Booms and sudden stops," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1140-1155.
  4. Kristin J. Forbes & Francis E. Warnock, 2011. "Capital Flow Waves: Surges, Stops, Flight, and Retrenchment," NBER Working Papers 17351, National Bureau of Economic Research, Inc.
  5. Calvo, Guillermo A. & Izquierdo, Alejandro & Loo-Kung, Rudy, 2006. "Relative price volatility under Sudden Stops: The relevance of balance sheet effects," Journal of International Economics, Elsevier, vol. 69(1), pages 231-254, June.
  6. Carmen Reinhart & Vincent Reinhart, 2009. "Capital Flow Bonanzas: An Encompassing View of the Past and Present," NBER Chapters, in: NBER International Seminar on Macroeconomics 2008, pages 9-62 National Bureau of Economic Research, Inc.
  7. Sebastian Edwards, 2007. "Capital Controls, Sudden Stops, and Current Account Reversals," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 73-120 National Bureau of Economic Research, Inc.
  8. Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals and Sudden Stops," NBER Working Papers 10276, National Bureau of Economic Research, Inc.
  9. Joyce, Joseph P. & Nabar, Malhar, 2009. "Sudden stops, banking crises and investment collapses in emerging markets," Journal of Development Economics, Elsevier, vol. 90(2), pages 314-322, November.
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