Surges and Sudden Stops of Capital Flows to Emerging Markets

Sula, Ozan (2006): Surges and Sudden Stops of Capital Flows to Emerging Markets. Unpublished.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Capital flows; Sudden stops; Surges in capital flows; Emerging Markets; private loans; portfolio flows; foreign direct investment
• Subjects: F - International Economics > F3 - International Finance > F32 - Current Account Adjustment; Short-Term Capital Movements; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics

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