The Evidence and Impact of Financial Globalization

Chapter 37

Sudden Stops in Capital Flows

A. Izquierdo

Inter-American Development Bank, Washington, DC, USA

Outline

Introduction

Empirical Definition of a Sudden Stop and Evidence on the Costs of Sudden Stops

Costs of Sudden Stops

Determinants of Sudden Stops

Ex-ante Policies and Policy Responses to Sudden Stops

Conclusion

Glossary

References

Introduction

The term Sudden Stop can be first traced to work by Dornbusch et al. (1995), quoting the banker’s adage “it is not speed that kills, it is the Sudden Stop” applied in the context of currency crises and collapses following unsuccessful stabilization policies. However, this concept was first defined and formalized by Calvo (1998) from a different perspective. Under this view, independently of previous ...