
Contents
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7.1 Introduction 7.1 Introduction
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7.2 Patterns of Sudden Stops 7.2 Patterns of Sudden Stops
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7.3 Capital Flows and Currency Crashes 7.3 Capital Flows and Currency Crashes
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7.4 Domestic Financial Imperfections and Procyclical Behavior 7.4 Domestic Financial Imperfections and Procyclical Behavior
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7.5 Conclusion 7.5 Conclusion
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Appendix A A Benchmark Model of Nominal Exchange Rate Determination Appendix A A Benchmark Model of Nominal Exchange Rate Determination
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Appendix B Data Construction and Sources Appendix B Data Construction and Sources
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Argentina Argentina
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Brazil Brazil
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Chile Chile
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Greece Greece
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Italy Italy
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Portugal Portugal
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Russia Russia
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Spain Spain
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Australia Australia
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Canada Canada
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Denmark Denmark
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Finland Finland
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New Zealand New Zealand
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Norway Norway
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Sweden Sweden
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United States United States
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European Core Countries European Core Countries
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References References
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Sudden Stops and Currency Drops: A Historical Look
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Published:August 2007
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Abstract
This chapter describes the historical evidence on sudden stops (SSs) using a new international data set on capital inflows spanning sixteen countries since the early days of financial globalization, around 1870—when asset market arbitrage was greatly spurred by the advent of the transatlantic telegraph in 1866. Two key features that underpin the current relevance of this period are the high degree of integration of world capital markets and the widespread use of bond financing as the main instrument of sovereign borrowing—two clear similarities with its late twentieth-century/early twenty-first century counterpart. The chapter also establishes the links between SSs and currency crashes. One feature of the pre-World War I period, which makes it especially interesting to look at this relationship, is the existence of an international monetary system that provided a key incentive for countries to peg their currencies to gold and thus forestall devaluations or depreciations.
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