Estimation and out-of-sample Prediction of Sudden Stops: Do Regions of Emerging Markets Behave Differently from Each Other?

June 25, 2015

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Format: Chicago

Fabio Comelli. Estimation and out-of-sample Prediction of Sudden Stops: Do Regions of Emerging Markets Behave Differently from Each Other?, (USA: International Monetary Fund, 2015) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We identify episodes of sudden stops in emerging economies and estimate the probability to observe them. Sudden stops are more likely when global growth falters, risk aversion in financial markets rises, and vulnerabilities in the external and financial sectors increase. However, the significance of the explanatory variables vary across regions. In Latin America and Eastern Europe, gross capital inflows are more responsive to changes in global growth than in Asia. Trade linkages tend to be more important than financial linkages in Eastern Europe, while in Asia and Latin America the opposite is true. The model captures only a third of sudden stops outside the estimation sample, but issues reliable sudden stop signals.

Subject: Balance of payments, Capital flows, Capital inflows, Capital outflows, Emerging and frontier financial markets, Financial markets, Sudden stops

Keywords: Aggregate of emerging market economies, Asia and Pacific, Capital flows, Capital inflows, Capital outflows, Central Asia, Eastern Europe, EECAA country, EECAA emerging market economies, EECAA region, EECAA specification, Emerging and frontier financial markets, Emerging market economies, External shock, Global, Global real GDP growth, Gross capital inflows, Importance of emerging market economies, Net capital flow, Nom. GDP, Region of emerging market economies, Sudden stops, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/138
Stock No:

WPIEA2015138
ISBN:

9781513563442
ISSN:

1018-5941

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