On the Consequences of Sudden Stops

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dc.description.abstract Our analysis shows a number of interesting empirical regularities. First, when we apply a simple definition of sudden stops, we find that they have been a fairly common occurrence at least since the late 1970s. Second, economic performance after a sudden stop can differ dramatically across countries, depending on certain country characteristics. We show that open economies and those that choose a floating exchange rate regime after a crisis recover fairly quickly from the output contraction that usually comes with the sudden stop, whereas countries with liability dollarization recover more slowly. These characteristics relate to how the economies adjust exports and imports during the aftermath of a sudden stop. Open economies that do not show much liability dollarization tend to show higher export growth and less import contraction than highly dollarized economies. The paper is organized as follows. The next section discusses our definition of sudden stops. We then examine the stylized facts associated with sudden stops, including their regional coverage and evolution over time. A subsequent section proceeds to identify the key factors that explain the nature of the aftermath of a sudden stop in capital flows. If sudden stops remain a recurrent feature of emerging market economies in years to come, the issue of how to ensure a quick return of growth in the aftermath of a crisis will require attention. Policy recommendations focused on improving such ex post performance should go hand in hand with traditional prevention measures designed to avoid the crises. We elaborate on these conclusions in the final section. en
dc.title On the Consequences of Sudden Stops en
dc.contributor.author Guidotti, Pablo E.
dc.contributor.author Sturzenegger, Federico
dc.contributor.author Villar, Agustín
dc.date.accessioned 2014-11-10T21:49:50Z
dc.date.available 2014-11-10T21:49:50Z
dc.date.issued 2004-03
dc.identifier.issn 1529-7470
dc.identifier.uri http://hdl.handle.net/123456789/48723
lacea.language.supported en
dc.contributor.other Comments by Gordon H. Hanson and Claudio Bravo-Ortega
dc.language.iso en
dc.publisher Brookings Institution Press
dc.subject Monetary policy
dc.subject Central banking
dc.subject Sudden stops
dc.subject Capital flows
dc.subject Latin America
dc.subject Public finance
dc.type Article

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