IMF Working Papers

The Persistence of Capital Account Crises

Author/Editor:

Mauro Mecagni ; Ruben V Atoyan ; David J Hofman

Publication Date:

May 1, 2009

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

This study contributes to the literature on capital account crises in two ways. First, our analysis of crisis episodes between 1994 and 2002 establishes a clear relationship between the persistence of crises, their complexity, and the intensity of movement of key macroeconomic variables. Second, we provide a systematic examination of the determinants of crisis duration. Our econometric analysis suggests that initial conditions and the external environment plays a key role in determining crisis persistence. The policy response also matters, but cannot offset a record of poor past policies. Overall, the results underscore the critical importance of crisis prevention efforts.

Series:

Working Paper No. 2009/103

Subject:

Balance of payments Capital account crisis Exchange rate arrangements External debt Financial crises Financial services Foreign exchange Real interest rates

Frequency:

Monthly