The impact of sudden stops in capital flows on output and investment: Selected emerging markets

Noha EMARA, Congcong NI, Ya GAO

Abstract


Abstract. We evaluate how vulnerable the emerging markets are to sudden stops, that is, capital inflow reversals, using panel data for 12 emerging economies for the period 1976-2002 that experienced such reversals. We investigate the impact of sudden stops on the macroeconomic indicators of economic growth and investment by employing the Generalized Method of Moments (GMM) estimation methodology. A robustness check is performed using regional groups and introducing additional control variables. We find that sudden stops have lagging, negative, and robust effect on output and investment, while the effect on investment is not always robusth.

Keywords. Sudden stops, Economic growth, Capital flows, Emerging markets, GMM.

JEL. E40, F32, F36, G15.


Keywords


Sudden stops; Economic growth; Capital flows; Emerging markets; GMM.

Full Text:


References


Calvo, G.A. (2003). Explaining sudden stop, growth collapse, and BOP crisis: the case of distortionary output taxes, IMF Staff Paper Vol.50. doi. 10.3386/w9864

Calvo, G.A., Izquierdo, A., & Mejia, L. (2004). On the empirics of Sudden Stops: the relevance of balance-sheet effects, NBER Working Paper, No.10520. doi. 10.3386/w10520

Calvo, G.A., Izquierdo, A., & Talvi, E. (2006). Phoenix miracles in emerging markets: recovering without credit from systemic financial crises, NBER Working Paper, No.12101. doi. 10.3386/w12101

Calvo, G.A., & Reinhart, C.M. (2000). When capital inflows come to a sudden stop: Consequences and policy options, Reforming the international Monetary and financial system, pp.175-201. [Retrieved from].

Guidotti, P.E., Sturzenegger, F., & Villar, A. (2004). On the consequences of sudden stops, Economia, 4(2), 171-214. doi. 10.1353/eco.2004.0016

Hutchison, M.M., & Noy, I. (2006). Sudden stops and the Mexican wave: currency crises, capital flow reversals and output loss in emerging markets, Journal of Development Economics, 79 225-248. doi. 10.1016/j.jdeveco.2004.12.002

Joyce, J.P., & Nabar, M. (2008). Sudden stops, banking crises and investment collapses in emerging markets, Journal of Development Economics, 90(2), 314-322. doi. 10.1016/j.jdeveco.2008.04.004

Makki, S.S., & Somwaru, A. (2004). Impact of foreign direct investment and trade on economic growth: Evidence from developing countries, American Journal of Agricultural Economics, 86(3), 795-801. doi. 10.1111/j.0002-9092.2004.00627.x

Mendoza, E.G. (2010). Sudden stops, financial crises, and leverage, American Economic Review, 100(5), 1941-1966. doi. 10.1257/aer.100.5.1941

Mishkin, F.S. (1999). Lessons from the tequila crisis, Journal of Banking & Finance, 23(10), 1521-1533. doi. 10.1016/S0378-4266(99)00029-1

Obstfeld, M. and Taylor, A.M. 2001, “Globalization and Capital Markets”, NBER Published Volume “Globalization in Historical Perspective”, 2003

Paola, P. (2010). The case of Mexico's 1995 Peso crisis and Argentina's 2002 convertibility crisis: Including children in policy responses to previous economic crises, UNICEF Working Paper. [Retrieved from].

Sula, O. (2010). Surges and sudden stops of capital flows to emerging markets, Open Economies Review, 21(4), 589-605. doi. 10.1007/s11079-008-9103-7




DOI: http://dx.doi.org/10.1453/ter.v5i4.1781

Refbacks

  • There are currently no refbacks.


Bookmark and Share


.......................................................................................................................................................................................................................................................................................................................................

Turkish Economic Review - Turk. Econ. Rev. - TER - www.kspjournals.org

ISSN: 2149-0414

Editor: ter@ksplibrary.org   Secretarial: secretarial@ksplibrary.org   Istanbul - Turkey.

Copyright © KSP Library