TY - BOOK ID - 134244379 TI - When Do Sudden Stops Really Hurt? AU - Caner, Mehmet AU - Koehler-Geib, Fritzi AU - Vincelette, Gallina Andronova PY - 2009 PB - Washington, D.C., The World Bank, DB - UniCat KW - Adjustment dynamics KW - Adjustment path KW - Annual growth KW - Capital flows KW - Currencies and Exchange Rates KW - Debt Markets KW - Descriptive statistics KW - Economic Growth KW - Economic growth KW - Economic policy KW - Economic Theory and Research KW - Emerging Markets KW - Equilibrium KW - Exchange rate fluctuations KW - Finance and Financial Sector Development KW - Financial crisis KW - Growth performance KW - Growth rate KW - Growth rates KW - Inequality KW - International financial markets KW - Investment and Investment Climate KW - Macroeconomic Management KW - Macroeconomics and Economic Growth KW - Poverty Reduction KW - Poverty reduction KW - Private Sector Development KW - Pro-Poor Growth KW - Real exchange rate KW - Robustness checks KW - Speed of adjustment KW - Time horizon KW - Trade shocks UR - https://www.unicat.be/uniCat?func=search&query=sysid:134244379 AB - This paper analyzes the drivers and consequences of sudden stops of capital flows. It focuses on the impact of external vulnerability on the depth and length of sudden stop crises. The authors analyze 43 developing and developed countries between 1993 and 2006. They find evidence that external vulnerability not only significantly impacts the probability of a sudden stop crisis, but also prolongs the time it takes for growth to revert to its long-term trend once a sudden stop occurs. Interestingly, external vulnerability does not significantly impact the size of the instantaneous output effect in case of a sudden stop but prompts a cumulative output effect through significantly diminishing the speed of adjustment of output to its trend. This finding implies that countries financing a large part of their absorption externally do not suffer more ferocious output losses in a sudden stop crisis, but take longer to adapt afterward and are hence expected to suffer more protracted crises periods. Compared with previous literature, this paper makes three contributions: (i) it extends the country and time coverage relative to datasets that have previously been used to analyze related topics; (ii) it specifically accounts for time-series autocorrelation; and (iii) it provides an analysis of the adjustment path of economic growth after a sudden stop. ER -