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J. Mon. Ec. 2013, 8(3): 1-20 Back to browse issues page
How do Sudden Stops of Capital Flows Affect Currency Crises in Asia?
Mehdi Yazdani 1, Seyed Komail Tayebi2
1- Shahid Beheshti University
2- University of Isfahan
Abstract:   (3202 Views)

Sudden stops can be characterized by sharp reversals in capital inflows, large declines in output, and steep collapses in real asset prices (Mendoza and Smith, 2009). In almost all recent crises, capital account reversals amounting to more than 10% of an afflicted country’s GDP have occurred (Calvo and Reinhart, 1999 and Nabli, 1999). More specifically, reversals in capital flows to emerging market countries in the 1990s and early 2000s exerted a substantial influence on the relevant economies affected even leading to financial crises, while, on the whole, international capital reversal has been absent in the case of advanced countries. Another characteristic of recent crises is the swiftness and the magnitude of the crises itself and its impact on asset prices and the exchange rate. The objective of this paper is to examine the role of sudden stops in causing a currency crisis in Asia. Moreover, the herding behaviors on capital flows will be analyzed in Asian emerging countries. So the probability of the occurring a currency crisis after sudden stop in capital inflows caused by herding behaviors will be estimated by a Logit regression for Asian countries during 1970-2011. In general, the econometric results have indicated that fluctuations in international capital flow, leading to sudden stops, have been significant determinants of currency risk during the recent currency crises.

JEL Classification: C23, C25, F41, G01

Received: 11/4/2013        Approved: 6/30/2014

Keywords: Sudden stop, Capital reversal, Currency crisis, Herding behavior, Emerging markets, Asia
Full-Text [PDF 236 kb]   (2182 Downloads)    
Type of Study: Research | Subject: Economics
Received: 2015/02/15 | Accepted: 2015/02/15 | Published: 2015/02/15
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Yazdani M, Tayebi S K. How do Sudden Stops of Capital Flows Affect Currency Crises in Asia?. J. Mon. Ec.. 2013; 8 (3) :1-20
URL: http://jme.mbri.ac.ir/article-1-113-en.html

Volume 8, Issue 3 (summer 2013) Back to browse issues page
Journal of Money and Economy Journal of Money And Economy
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