Fear of Sudden Stops: Lessons from Australia and Chile

Abstract

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Sudden stops: Determinants and output effects in the first era of globalization, 1880–1913

“…31 As these countries developed, they maintained credibility in financial markets by keeping strong reserve positions, implementing less pro-cyclical fiscal programs and expanding and diversifying their industrial base thereby reducing exposure to systemic financial crises. As Caballero et al (2005) put it, many countries have yet to develop country and currency trust. The determinants of these deeper fundamentals remain an open question but one that needs investigation as global capital markets become increasingly connected.…”

“…This is a phenomenon very resonant to the role of liability dollarization in the emerging market financial crises of the 1990s. Whether liability dollarization rendered countries more financially fragile or not was related to the presence of strong institutions and sound policy-what Caballero et al (2005) refer to as country and currency trust. Country trust is based on sound institutions, strong rule of law and stable political systems.…”

Are there different linkages of foreign capital inflows and the current account between industrial countries and emerging markets?

“…3 However, developed and developing countries are different and suggesting that the U.S. will suffer from capital account crisis that Asian countries experienced in the late 1990s is unfitted. As opined by Caballero et al (2005), Australia, with its flexible 1 Stiglitz (2004) argued that as there is considerable information asymmetry in international financial markets, free capital mobility does not necessarily lead to an optimal allocation of resources. Rodrik (1998) emphasized that openness to international capital flows can be especially dangerous if the appropriate controls, regulatory apparatus, and macroeconomic frameworks are not in place.…”

A New Multidimensional Measure of Development: The Role of Technology and Institutions

“…As SI III is more about the potential for development and as it measures capital accumulation behaviour, it is not correlated with either real per capita income (0.102) or HDI (0.083). There is considerable development literature that highlights the importance of capital accumulation for growth Caballero et al 2005;Rogers 2003). However, Denison (1964Denison ( , 1980 argues that capital has sometimes contributed to growth differences in places but falls short of fully explaining international differences in growth rates.…”