Preparing for the Next Financial Crisis

The world economy has experienced growing nancial liberalization and inte-

gration in the last 30 years. However, abrupt and large capital outows observed

in the wake of the GFC have altered views on the costs and benets of openness

to international capital ows.

Sudden stops or capital ow reversals have occurred in emerging countries

(Asia, Argentina, Brazil, Turkey, etc.), but advanced economies too have not

been immune to sudden stops. According to Agosin et al. (2019), who used

data for 59 countries, 22 of which are developed economies, over the period

1976–2010, advanced economies and emerging ones have had the same num-

ber of sudden stops for capital inows. During the sovereign debt crisis in the

euro area (2011–2012), several p ...