{
  "title": "Do Some Forms of Financial Flows Help Protect From Sudden Stops?",
  "publication": "IMF Working Papers, September 1, 2006",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/do-some-forms-of-financial-flows-help-protect-from-sudden-stops-19540",
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  "summary": "There is a debate on whether some forms of financial flows offer better crisis protection than others. Using a large panel of advanced, emerging, and developing countries during 1970-2003, this paper analyzes the behavior of various types of flows: foreign direct investment (FDI), portfolio equity i",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Research question: whether some forms of financial flows offer better crisis protection than others.\n- Sample and period: a large panel of advanced, emerging, and developing countries during 1970-2003.\n- Types of flows analyzed: foreign direct investment (FDI), portfolio equity investment, portfolio debt investment, other flows to the official sector, other flows to banks, and other flows to the non-bank private sector."
    },
    {
      "heading": "Key findings on behavior of flow types",
      "content": "- Differences across types of flows are limited with respect to:\n  - volatility,\n  - persistence,\n  - cross-country comovement,\n  - correlation with growth at home or in the world economy.\n- FDI is found to be the least volatile form of financial flows when taking into account the average size of net or gross flows.\n- During normal periods:\n  - portfolio equity and portfolio debt show behavior broadly similar to other flow types in many dimensions."
    },
    {
      "heading": "Behavior during \"sudden stops\"",
      "content": "- Definition used: drops in total net financial inflows by more than 5 percentage points of GDP compared with the previous year.\n- Observed patterns in such episodes:\n  - FDI is remarkably stable.\n  - Portfolio equity also seems to play a limited role (limited change).\n  - Portfolio debt experiences a reversal, though it recovers relatively quickly.\n  - Other flows (including bank loans and trade credit) experience severe drops and remain depressed for a few years."
    },
    {
      "heading": "Implications and interpretation",
      "content": "- The empirical results are consistent with conventional wisdom that FDI is the most stable form of financial inflow relative to its size.\n- Different flow types exhibit markedly different dynamics in crisis episodes, with other flows (bank lending, trade credit) being most vulnerable and persistent in their decline."
    },
    {
      "heading": "Data scope and metadata",
      "content": "- Period covered: 1970-2003.\n- Pages: 23.\n- Publication date: September 1, 2006.\n- Series and identifiers:\n  - Working Paper No. 2006/202\n  - Volume: 2006\n  - Issue: 202\n  - DOI: https://doi.org/10.5089/9781451864625.001\n\nSource: IMF Working Paper \"Do Some Forms of Financial Flows Help Protect From Sudden Stops?\" by Paolo Mauro and Andrei A Levchenko (September 1, 2006).\n\n---\n\n Content in this bundle\n\n- Wp06202\n  - Wp06202 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Wp06202 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/do-some-forms-of-financial-flows-help-protect-from-sudden-stops-19540"
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    "Authors: Paolo Mauro, Andrei A Levchenko",
    "Published: September 1, 2006",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451864625.001",
    "Research question: whether some forms of financial flows offer better crisis protection than others.",
    "Sample and period: a large panel of advanced, emerging, and developing countries during 1970-2003.",
    "Types of flows analyzed: foreign direct investment (FDI), portfolio equity investment, portfolio debt investment, other flows to the official sector, other flows to banks, and other flows to the non-bank private sector.",
    "Differences across types of flows are limited with respect to:",
    "FDI is found to be the least volatile form of financial flows when taking into account the average size of net or gross flows.",
    "During normal periods:",
    "Definition used: drops in total net financial inflows by more than 5 percentage points of GDP compared with the previous year.",
    "Observed patterns in such episodes:",
    "The empirical results are consistent with conventional wisdom that FDI is the most stable form of financial inflow relative to its size.",
    "Different flow types exhibit markedly different dynamics in crisis episodes, with other flows (bank lending, trade credit) being most vulnerable and persistent in their decline.",
    "Period covered: 1970-2003.",
    "Pages: 23.",
    "Publication date: September 1, 2006.",
    "Series and identifiers:",
    "**Wp06202**"
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