| By: |
Saubhik Deb (Department of Economics) |
| Abstract: |
This paper studies the effects of capital flow reversals and sudden stop
crises on output growth and how these effects vary across regions and between
emerging and industrial countries. We found that capital flow reversals are
generally contractionary in the developing countries and particularly in Asia
and Africa. But neither capital flow reversals nor sudden stop crises have any
significant growth effect in the industrial countries. Our initial estimates
for sudden stop crises support the widely held belief regarding the
contractionary nature of such crises. Further robustness checks indicate that
the estimated negative growth effects for such crises are mainly driven by the
presence of the Asian countries in the sample. Moreover, when the turbulent
years of the East Asian crises are excluded from the sample, no significant
effect of sudden stop crises could be found. Our research reconfirms the
contractionary nature of capital flow reversals in developing countries but
raises doubt about the existence of contractionary sudden stop crises. |
| Keywords: |
Currency Crisis, Capital Flow Reversal, Sudden Stop Crisis |
| JEL: |
F32 F43 |
| Date: |
2006–04–06 |
| URL: |
http://d.repec.org/n?u=RePEc:rut:rutres:200606&r=fdg |