Guillermo Calvo, Alejandro Izquierdo, and Luis-Fernando Mejía
- Published in print:
- 2016
- Published Online:
- May 2017
- ISBN:
- 9780262035415
- eISBN:
- 9780262336017
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262035415.003.0008
- Subject:
- Economics and Finance, Macro- and Monetary Economics
Using a sample of 110 developed and developing countries for the period 1990-2004, the chapter claims that a small supply of tradable goods relative to their domestic absorption, and large ...
More
Using a sample of 110 developed and developing countries for the period 1990-2004, the chapter claims that a small supply of tradable goods relative to their domestic absorption, and large foreign-exchange denominated debts towards the domestic banking system, denoted Domestic Liability Dollarization, are key determinants of the probability of Systemic Sudden Stop (3S). Moreover, the larger is financial integration, the larger is likely to be the probability of 3S; however, beyond a critical point the relationship gets a sign reversion.Less
Using a sample of 110 developed and developing countries for the period 1990-2004, the chapter claims that a small supply of tradable goods relative to their domestic absorption, and large foreign-exchange denominated debts towards the domestic banking system, denoted Domestic Liability Dollarization, are key determinants of the probability of Systemic Sudden Stop (3S). Moreover, the larger is financial integration, the larger is likely to be the probability of 3S; however, beyond a critical point the relationship gets a sign reversion.
Guillermo Calvo and Pablo Ottonello
- Published in print:
- 2016
- Published Online:
- May 2017
- ISBN:
- 9780262035415
- eISBN:
- 9780262336017
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262035415.003.0007
- Subject:
- Economics and Finance, Macro- and Monetary Economics
The chapter presents stylized facts about recession episodes associated with Systemic Sudden Stops (3S), i.e., large and abrupt reversals in capital inflows in which several economies are hit at ...
More
The chapter presents stylized facts about recession episodes associated with Systemic Sudden Stops (3S), i.e., large and abrupt reversals in capital inflows in which several economies are hit at about the same time. This choice is motivated by the conjecture that 3S are mostly triggered by liquidity malfunction, which is a central topic of the book. The chapter documents that the contraction of economic activity during 3S recession episodes is mostly driven by measured TFP, and is accompanied by a collapse in bank credit, investment, little consumption smoothing, and a large adjustments of real wages and the real exchange rate. The recovery from these episode occurs with a precarious recovery of credit (“Phoenix Miracles”) and displays persistent effects on economic activity, investment, and real wages.Less
The chapter presents stylized facts about recession episodes associated with Systemic Sudden Stops (3S), i.e., large and abrupt reversals in capital inflows in which several economies are hit at about the same time. This choice is motivated by the conjecture that 3S are mostly triggered by liquidity malfunction, which is a central topic of the book. The chapter documents that the contraction of economic activity during 3S recession episodes is mostly driven by measured TFP, and is accompanied by a collapse in bank credit, investment, little consumption smoothing, and a large adjustments of real wages and the real exchange rate. The recovery from these episode occurs with a precarious recovery of credit (“Phoenix Miracles”) and displays persistent effects on economic activity, investment, and real wages.
