Systemic Sudden Stops: The Relevance of Balance-Sheet Effects and Financial Integration

By Guillermo A. Calvo, Alejandro Izquierdo, Luis-Fernando Mejía. 2008

283 citations recorded by the source corpus.

Using a sample of 110 developed and developing countries for the period 1990-2004, this paper analyzes the characteristics of systemic sudden stops (3S) in capital flows and the relevance of balance-sheet effects in the likelihood of their materialization. A small supply of tradable goods relative to their domestic absorption?a proxy for potential changes in the real exchange rate?and large foreign-exchange denominated debts towards the domestic banking system are claimed to be key determinants of the probability of 3S, producing a balancesheet effect with non-linear impacts on the probability of 3S. While financial integration is up to a point associated with a higher likelihood of 3S, beyond that point financial integration is associated with a lower likelihood of 3S.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/8960c749c7eb09aae194b9b6acebd86a829ab873

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

The Great Retrenchment: International Capital Flows During the Global Financial Crisis (2011, unknown): “Calvo et al (2008) document that sudden stops are more likely for countries which rely more on short-term funding from banks or portfolio investment than on foreign direct investment.”
Financial Crises: Explanations, Types, and Implications (2013, unknown): “Calvo et al. (2004) identified 33 Sudden Stop events with large and mild output collapses in a sample of 31 emerging market countries.”
Capital Flow Waves: Surges, Stops, Flight, and Retrenchment (2012, unknown): “For “how sharp”, Calvo et al. (2004) mark the beginning of an episode at the month t”
Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises?: Cross-Country Evidence on Bonanzas in Capital Inflows and Bonanza-Boom-Bust Cycles (2012, unknown): “Yet, as found by Calvo et al. (2008) and Agośın and Huaita (Forthcoming), countries are exposed to sudden stops.”
Determinants of Global Spillovers from US Monetary Policy (2015, background): “…more financially open de jure are more likely to experience sudden stops and current account reversals (see Rey and Martin, 2006; Edwards, 2007a; Calvo et al., 2008; Milesi-Ferretti and Tille, 2011); also, the adverse consequences once the latter occur are more severe in financially integrated…”
The Transmission of Financial Stress from Advanced to Emerging Economies (2009, background): “The main papers surveyed are Calvo et al. (2008), Chamon et al. (2007), Demirgüç-Kunt et al. (2006), Edison (2003), Eichengreen and Bordo (2002), Honohan and Laeven (2005), Kaminsky and Reinhart (1999), Laeven and Valencia (2008), Reinhart and Reinhart (2009), Reinhart and Rogoff (2008, 2009), and…”