Fear of sudden stops
Subtitle: lessons from Australia and Chile
By: Ricardo Caballero, Kevin Cowan, Jonathan Kearns.
Contributors: Cowan, Kevin.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10519; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10519.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Latin American economies are exposed to substantial external vulnerability.  Domestic imbalances and terms of trade shocks are often exacerbated by sudden stops of capital inflow.  In this paper we explore ways of overcoming external vulnerability, drawing lessons from a detailed comparison of the response of Chile and Australia to recent external shocks and from Australia's historical experience.  We argue that in order to understand sudden stops and the mechanisms to smooth them, it is useful to identify and then distinguish between two inter-related dimensions of investors' confidence: country-trust and currency-trust.  Lack of country-trust is a more fundamental and serious problem behind sudden stops.  But lack of currency-trust may both be a source of country-trust problems and weaken a country's ability to deal with sudden stops.  We discuss steps to improve along these two dimensions of investors' confidence in the medium run, and policies to reduce the impact of country-trust and currency-trust weaknesses in the short run"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/12/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.