Working Papers

A New Taxonomy of Sudden Stops: Which Sudden Stops Should Countries Be Most Concerned About?

AUTHOR(s): Cavallo, Eduardo A. , Pedemonte, Mathieu , Powell, Andrew , Tavella, Pilar
PUBLISHED: August 2013


This paper proposes a new taxonomy of Sudden Stops comprised of seven categories with definitions depending on the behavior of gross and net capital flows. The incidence of different types of Sudden Stops is tracked over time and the type of Sudden Stop related to economic performance. Sudden Stops in Net Flows associated with reductions in Gross Inflows are more disruptive than those where surges in (only) Gross Outflows dominate. The paper further discusses the mechanisms that might result in Sudden Stops in Gross Flows that are not Sudden Stops in Net Flows, such that shifts in financial assets or liabilities do not require a sharp current account adjustment. Still, it is found that Sudden Stops in Gross Inflows that do not provoke a sharp contraction in Net Flows may also be disruptive, including Sudden Stops that are driven by “other flows” -which include banking flows. The results suggest new avenues for research and future policy analysis.

Related links:

Related Research by JEL Codes:
(or click here to find research by JEL Codes)
  • Domestic Antidotes to Sudden Stops
    Working Papers
    IDB-WP-851 - November 2017

    Sudden Stops in net capital flows can be prevented when the actions of domestic investors offset a reduction in foreign lending. This paper presents evidence that while sudden stops in gross inflows—i.e., a tightening of the external borrowing constraint—are associated with global conditions and therefore, are largely outside of the control of local policymakers, domestic factors such as low l ... (View publication)

  • Capital Control Measures: A New Dataset
    Working Papers
    IDB-WP-573 - February 2015

    This paper presents and describes a new dataset of capital control restrictions on both inflows and outflows of 10 categories of assets for 100 countries over the period 1995 to 2013. Building on the data first presented in Schindler (2009) and other datasets based on the analysis of the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER), this dataset includes addition ... (View publication)

  • News Shocks and Asset Price Volatility in General Equilibrium
    Working Papers
    IDB-WP-252 - June 2011

    This paper studies equity price volatility in general equilibrium with news shocks about future productivity and monetary policy. As West (1998) shows, in a partial equilibrium present discounted value model, news about the future cash flow reduces asset price volatility. This paper shows that introducing news shocks in canonical dynamic stochastic general equilibrium model may not reduce asset pr ... (View publication)

Hello, Welcome to the IDB!

Please join our mailing list by simply entering your email below.