Does openness to trade make countries more vulnerable to sudden stops, or less? Using gravity to establish causality

Journal of International Money and Finance

Volumn 27, Issue 8, 2008, Pages 1430-1452

  Cavallo, Eduardo A ^a   Frankel, Jeffrey A ^b  

^a INTER AMERICAN DEVELOPMENT BANK   (United States)

^b HARVARD UNIVERSITY   (United States)

Author keywords

Current account adjustment; Gravity model; Sudden stops; Trade

Indexed keywords

EID: 54849411568     PISSN: 02615606     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jimonfin.2007.10.004     Document Type: Article

References (39)

1. Acemoglu D., Johnson S., and Robinson J. The colonial origins of comparative development: an empirical investigation. American Economic Review 91 5 (2003) 1369-1401
2. Aizenman J. On the hidden links between financial and trade opening. Journal of International Money and Finance 27 3 (2008) 372-386
3. Aizenman, J., Noy, I., 2004. On the two way feedback between financial and trade openness. NBER Working Paper No. 10496, Cambridge, MA.
4. Alesina, A., Wagner, A., 2003. Choosing (and reneging on) exchange rate regimes. NBER Working Paper No. 9809, Cambridge, MA.
5. Arteta C. Exchange rate regimes and financial dollarization: does flexibility reduce bank currency mismatches?. Berkeley Electronic Journals in Macroeconomics. Topics in Macroeconomics 5 1 (2005). http://www.bepress.com/bejm/topics/vol5/iss1/art10 Article 10
6. Arteta C. Are financially dollarized countries more prone to costly crises?. Monetaria 28 Spring (2005) 105-160
7. Calvo, G., Izquierdo, A., Talvi, E., 2003a. Sudden stops, the real exchange rate, and fiscal sustainability: Argentina's lessons. NBER Working Paper 9828, Cambridge, MA.
8. Calvo, G., Izquierdo, A., Mejia, L.F., 2003b. On the empirics of sudden stops. NBER Working Paper No. 10520, Cambridge, MA.
9. Calvo G., Izquierdo A., and Loo-Kung R. Relative price volatility under sudden stops: the relevance of balance sheet effects. Journal of International Economics 69 1 (2006) 231-254
10. Calvo G. Capital flows and capital-market crises: the simple economics of sudden stops. Journal of Applied Economics 1 1 (1998) 35-54
11. Cavallo, E.A., 2006. Trade, gravity and sudden stops: on how commercial trade can increase the stability of capital flows. Inter-American Development Bank Working Paper #588, Washington, DC.
12. Cavallo, E.A., Frankel, J.A., 2007. Does openness to trade make countries more vulnerable to sudden stops, or less? Using gravity to establish causality. Inter-American Development Bank Working Paper #618, Washington, DC (Revised from NBER Working Paper No. 10957, Cambridge MA, 2004).
13. Céspedes L.F., Chang R., and Velasco A. IS-LM-BP in the Pampas. IMF Staff Papers 50 Special issue (2003) 143-156
14. Dooley M. International financial architecture and strategic default: can financial crises be less painful?. Carnegie-Rochester Conference Series on Public Policy 53 1 (2000) 361-377
15. Dornbusch R., Goldfajn I., and Valdes R. Currency crises and collapses. Brooking Papers on Economic Activity 2 (1995) 219-293
16. Easterly W., Islam R., and Stiglitz J. Shaken and stirred: explaining growth volatility. In: Plesokovic B., and Stern N. (Eds). Annual World Bank Conference on Development Economics (2001)
17. Edwards S. Financial openness, sudden stops and current account reversals. American Economic Review 94 2 (2004) 59-64
18. Edwards S. Thirty years of current account imbalances, current account reversals and sudden stops. IMF Staff Papers 51 (2004) (Special issue)
19. Feenstra, R., Lipsey, R., Bowen, H., 1997. World trade flows, 1970-1992, with production and tariff data. NBER Working Paper No. 5910.
20. Frankel J. Regional Trading Blocs (1997), Institute for International Economics, Washington, DC
21. Frankel J., and Romer D. Does trade cause growth?. American Economic Review 89 3 (1999) 379-399
22. Frankel J., and Rose A.K. Currency crashes in emerging markets: an empirical treatment. Journal of International Economics 41 (1996) 351-368
23. Frankel J., and Rose A.K. An estimate of the effect of common currencies on trade and income. Quarterly Journal of Economics 117 2 (2002) 437-466
24. Frankel J., and Wei S.J. Managing macroeconomic crises: policy lessons. In: Aizenman J., and Pinto B. (Eds). Economic Volatility and Crises: a Policy-oriented Guide (2004), World Bank, Washington, DC (Chapter 7)
25. Frankel J. Contractionary currency crashes in developing countries. IMF Staff Papers 52 2 (2005) 149-192
26. Guidotti P., Sturzenegger F., and Villar A. On the consequences of sudden stops. Economía 4 2 (2004) 171-214 (Spring)
27. Guimaraes, B., Morris, S.E., 2003. Risk and wealth in a model of self-fulfilling currency attacks. Cowles Foundation Discussion Paper No.1433.
28. Kaufmann, D., Kraay, A., Zoido-Lobatón, P., 2002. Governance matters II - updated indicators for 2000/0. World Bank Policy Research Department Working Paper No. 2772, Washington, DC.
29. Krugman P. Balance sheets effects, the transfer problem and financial crises. In: Isard P., Razin A., and Rose A.K. (Eds). International Finance and Financial Crises: Essays in Honour of Robert P. Flood, Jr. (1999), Kluwer Academic Publishers, Boston, MA 31-44
30. Levy-Yeyati E., and Sturzenegger F. A de facto classification of exchange rate regimes: a methodological note. American Economic Review 93 4 (2003)
31. Marshall M.G., and Jaggers K. Polity IV Project, Political Regime Characteristics and Transitions, 1800-2002 (2002), Center for International Development and Conflict Management, University of Maryland, College Park
32. Martin P., and Rey H. Globalization and emerging markets: with or without crash?. American Economic Review 96 5 (2006) 1631-1651
33. Martinez, J.V., Sandleris, G., 2006. Is it punishment? Sovereign defaults and the decline in trade. Unpublished Paper, Columbia University, New York, NY.
34. Milesi-Ferretti G.M., and Razin A. In: Krugman P. (Ed). Current Account Reversals and Currency Crises: Empirical Regularities (2000), University of Chicago Press, Chicago, IL
35. Milesi-Ferretti G.M., and Razin A. Sharp reductions in current account deficits: an empirical analysis. European Economic Review 42 3 (1998) 897-908
36. Reinhart C., Rogoff K., and Savastano M. In: Brainard W., and Perry G. (Eds). Debt Intolerance. Brookings Papers on Economic Activity 1 (2003) 1-74
37. Rivers D., and Vuong Q. Limited information estimators and exogeneity tests for simultaneous probit models. Journal of Econometrics 39 (1988) 347-366
38. Rose A. A reason why countries pay their debts: renegotiation and international trade. Journal of Development Economics 77 1 (2005) 189-206
39. Sachs J.D. External debt and macroeconomic performance in Latin America and East Asia. Brookings Papers on Economic Activity 2 (1985) 523-564