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Surges and Sudden Stops of Capital Flows to Emerging Markets

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  • Sula, Ozan

Abstract

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.

Suggested Citation

  • Sula, Ozan, 2006. "Surges and Sudden Stops of Capital Flows to Emerging Markets," MPRA Paper 383, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:383
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    More about this item

    Keywords

    Capital flows; Sudden stops; Surges in capital flows; Emerging Markets; private loans; portfolio flows; foreign direct investment;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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