A large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability. This paper investigates whether legal restrictions on international capital flows are associated with greater currency...

A large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability. This paper investigates whether legal restrictions on international capital flows are associated with greater currency...

This Economic Letter briefly reviews 11 papers that provide analytical perspectives and new empirical evidence on the causes of these crises as well as the appropriate policy responses. These papers, prepared for a conference sponsored by the Federal Reserve Bank of San Francisco’s Center for...

Sudden Stops are the simultaneous occurrence of a currency/balance of payments crisis with a reversal in capital flows (Calvo, 1998). We investigate the output effects of financial crises in emerging markets, focusing on whether sudden-stop crises are a unique phenomenon and whether they entail...

In this paper, we provide a theoretical explanation of why financial liberalization is likely to generate financial crises in emerging market economies. We first show that under financial repression the aggregate capital stock and bank net worth are both likely to be low. This leads a newly...

This paper develops an open-economy version of the Bernanke-Blinder model which indicates that sterilization efforts through increases in reserve requirements will have limited impact if viable financial alternatives to the commercial banking sector exists. We then examine the capital inflow...