{
  "title": "Sudden Stops and Currency Drops: A Historical Look",
  "publication": "IMF Working Papers, May 1, 2006",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/sudden-stops-and-currency-drops-a-historical-look-19099",
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  "summary": "This paper shows that recent manifestations of sudden stops (SSs) in international capital flows have striking parallels in the early financial globalization era preceding World War I.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Recent manifestations of sudden stops (SSs) in international capital flows have striking parallels in the early financial globalization era preceding World War I.\n- All main capital-importing countries then faced episodic capital flow reversals averaging some 5 percent of GDP and with a median duration of four years.\n- Most SSs displayed striking crosscountry synchronization, being immediately preceded by rising world interest rates.\n- Both fixed and floating exchange rate regimes were hit, with no significant differences between them.\n- Not all SSs resulted in currency drops: some countries experienced currency collapses, while others managed to preserve exchange rate stability.\n- Different responses are related to domestic \"frictions\" that heightened the procyclicality of absorption and hindered precautionary reserve accumulation in some countries relative to others."
    },
    {
      "heading": "Key Findings and Statistics",
      "content": "- Episodic capital flow reversals averaged: 5 percent of GDP.\n- Median duration of sudden stops: four years.\n- Publication pagination: Pages: 61.\n- Publication identifiers:\n  - Volume: 2006\n  - Issue: 133\n  - Series: Working Paper No. 2006/133\n  - DOI: https://doi.org/10.5089/9781451863932.001\n  - Stock No: WPIEA2006133\n  - ISBN: 9781451863932\n  - ISSN: 1018-5941"
    },
    {
      "heading": "Synchronization and Global Conditions",
      "content": "- Most SSs were immediately preceded by rising world interest rates, producing striking crosscountry synchronization of capital flow reversals.\n- Synchronization occurred across both fixed and floating exchange rate regimes, with no significant differences documented between them."
    },
    {
      "heading": "Exchange Rate Outcomes and Domestic Frictions",
      "content": "- Outcome heterogeneity:\n  - Some countries experienced currency collapses.\n  - Other countries preserved exchange rate stability despite SSs.\n- Determinants of divergent outcomes:\n  - Domestic \"frictions\" increased procyclicality of absorption.\n  - These frictions hindered precautionary reserve accumulation in some countries, reducing their ability to cushion against capital flow reversals."
    },
    {
      "heading": "Subject Classification and Keywords",
      "content": "- Subject: Capital flows, Capital inflows, Currencies, Exchange rates, Securities settlement systems\n- Keywords: crash event, currency crash, currency-crash country, money supply, WP\n\nSudden Stops and Currency Drops: A Historical Look — Luis Catão, May 1, 2006.\n\n---\n\n Content in this bundle\n\n- Net Foreign Capital Inflows\n  - Net Foreign Capital Inflows (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Net Foreign Capital Inflows (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/sudden-stops-and-currency-drops-a-historical-look-19099"
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    "Authors: Luis Catão",
    "Published: May 1, 2006",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451863932.001",
    "Recent manifestations of sudden stops (SSs) in international capital flows have striking parallels in the early financial globalization era preceding World War I.",
    "All main capital-importing countries then faced episodic capital flow reversals averaging some 5 percent of GDP and with a median duration of four years.",
    "Most SSs displayed striking crosscountry synchronization, being immediately preceded by rising world interest rates.",
    "Both fixed and floating exchange rate regimes were hit, with no significant differences between them.",
    "Not all SSs resulted in currency drops: some countries experienced currency collapses, while others managed to preserve exchange rate stability.",
    "Different responses are related to domestic \"frictions\" that heightened the procyclicality of absorption and hindered precautionary reserve accumulation in some countries relative to others.",
    "Episodic capital flow reversals averaged: 5 percent of GDP.",
    "Median duration of sudden stops: four years.",
    "Publication pagination: Pages: 61.",
    "Publication identifiers:",
    "Most SSs were immediately preceded by rising world interest rates, producing striking crosscountry synchronization of capital flow reversals.",
    "Synchronization occurred across both fixed and floating exchange rate regimes, with no significant differences documented between them.",
    "Outcome heterogeneity:",
    "Determinants of divergent outcomes:",
    "Subject: Capital flows, Capital inflows, Currencies, Exchange rates, Securities settlement systems",
    "Keywords: crash event, currency crash, currency-crash country, money supply, WP",
    "**Net Foreign Capital Inflows**"
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