Systemic Sudden Stops in Emerging Economies: A Recent Perspective

Tunio, Mohsin Waheed (2022): Systemic Sudden Stops in Emerging Economies: A Recent Perspective.

Abstract

This paper first looks for Sudden Stops in capital inflows to nineteen emerging economies of Asia, Europe, Latin America, and Africa as Calvo, Izquierdo and Mejia (2008) based on the country-specific data availability from January 1990 to May 2022. The paper then introduces the notion of Systemic Sudden Stop as the one triggered by exogenous factors and measured in terms of a rise in Emerging Market Bond Index (EMBI) spreads. The author finds out that four countries i.e. Indonesia, Thailand, Poland, and Egypt have already entered into the Systemic Sudden Stop phase while other emerging economies could also be at a greater risk of the similar situation. The major risks to emerging markets come from the commodity prices and rising inflation due to the Russia-Ukraine conflict; tightening financial conditions; mounting uncertainty; and recessionary fears. Nevertheless, on the positive note, net ratings of emerging market sovereign bonds have improved in comparison with the year 2020, and EMBI spreads have not increased much due to greater risk being already priced-in, especially in high yield.

• Item Type: MPRA Paper
• Language: English
• Keywords: sudden stops, capital inflows, capital outflows, emerging markets, exchange rate, current account, EMBI spreads
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; F - International Economics > F3 - International Finance > F39 - Other; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics

References

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