The next sudden stop

Sebnem Kalemli-Ozcan 07 January 2014

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The ominous facts are well known – the strongest predictors of financial crises are domestic credit booms and external debts (Reinhart and Rogoff 2011). In emerging markets, credit booms are generally preceded by large capital inflows (Reinhart and Reinhart 2010). Many high-growth emerging markets have been receiving capital inflows for the last five years as the developed economies have been attending to their wounds from the Global Financial Crisis. Now the tide is reversing. Emerging markets are experiencing slowdowns in growth and widening current-account deficits.

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Topics:  Financial markets International finance

Tags:  capital flows, emerging markets, global financial crisis, sudden stops, Turkey, tapering, liability dollarisation

The mother of all sudden stops: Capital flows and reversals in Europe, 1919-1932

Olivier Accominotti, Barry Eichengreen 14 September 2013

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From 2001 through 2008 one half of Europe received enormous capital inflows from the other half of Europe and the rest of the world.

  • Starting in 2009, the recipients then experienced a sudden stop, a capital-account reversal, and an economic and financial crisis (Pisani-Ferry and Merler 2102).

From 1924 through 1928 one half of Europe received enormous capital inflows from the other half of Europe and the rest of the world.

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Topics:  Economic history International finance

Tags:  sudden stops, East Europe, capital-account reversals

A new taxonomy of Sudden Stops: Which Sudden Stops should countries be most concerned about?

Eduardo Cavallo, Andrew Powell 30 August 2013

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Emerging markets have slowed alongside a rise in longer term US rates. The fear of ‘sudden stops’ in capital flows has risen. The academic literature on capital flows, perhaps as in other areas, has tended to focus on contemporaneous concerns:

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Topics:  Global crisis Macroeconomic policy

Tags:  capital flows, sudden stops

Sudden stops in the Eurozone

Jean Pisani-Ferry, Silvia Merler 02 April 2012

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Many analysts and observers have put forward that the euro crisis is a balance-of-payments crisis at least as much as a fiscal crisis (e.g. Carney 2012, Giavazzi and Spaventa 2011, Sinn 2012, Wolf 2011). The issue has gained further relevance with the widening of imbalances among EZ central banks within the Target2 settlement system and has important implications for both the short- and the long-term policy responses (Bornhorst and Mody 2012).

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Topics:  EU policies

Tags:  capital flows, current account, sudden stops, balance of payments

The G20 communiqué: Work in progress but good news for emerging markets

Guillermo Calvo 06 April 2009

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From the perspective of Financial Architecture, the G20 communiqué represents a major and positive change in the way world leaders view financial crises. They have definitely moved from a view according to which crises are largely homegrown, to a view that allows for the existence of systemic crises, chain-reaction accidents involving many innocent bystanders.

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Topics:  Global crisis

Tags:  emerging markets, global crisis debate, sudden stops

Lender of last resort: Put it on the agenda!

Guillermo Calvo 23 March 2009

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The subprime crisis is a massive failure of the shadow banking system that has affected all corners of the capital market and triggered worldwide deleveraging. We are in a severe credit crunch. Savers distrust private-sector dissavers, which gives rise to a fall in aggregate demand and a search for safe assets (“flight to quality”).

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Topics:  Global crisis

Tags:  emerging markets, lender of last resort, global crisis debate, sudden stops

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