
Contents
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2.1 Introduction 2.1 Introduction
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2.2 Measuring the Degree of Openness of the Capital Account 2.2 Measuring the Degree of Openness of the Capital Account
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2.3 The Evolution of Capital Mobility in the World Economy: 1970–2001 2.3 The Evolution of Capital Mobility in the World Economy: 1970–2001
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2.4 The Anatomy of Current Account Reversals and Sudden Stops: Is There a Difference between High and Low Capital Mobility Countries? 2.4 The Anatomy of Current Account Reversals and Sudden Stops: Is There a Difference between High and Low Capital Mobility Countries?
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2.4.1 Incidence of Sudden Stops and Reversals 2.4.1 Incidence of Sudden Stops and Reversals
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2.4.2 Sudden Stops, Reversals, and Capital Controls 2.4.2 Sudden Stops, Reversals, and Capital Controls
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2.4.3 Banking Crises 2.4.3 Banking Crises
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2.5 Capital Controls and the Costs of External Crises 2.5 Capital Controls and the Costs of External Crises
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2.5.1 Sudden Stops, Current Account Reversals, Capital Controls, and Growth: A Preliminary Analysis 2.5.1 Sudden Stops, Current Account Reversals, Capital Controls, and Growth: A Preliminary Analysis
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2.5.2 An Econometric Analysis 2.5.2 An Econometric Analysis
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Growth Effects of Sudden Stops and Current Account Reversals: Preliminary Econometric Results Growth Effects of Sudden Stops and Current Account Reversals: Preliminary Econometric Results
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Joint Estimation Joint Estimation
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The Treatment Equation. The Treatment Equation.
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Probability of Experiencing a Current Account Reversal. Probability of Experiencing a Current Account Reversal.
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GDP Growth Models. GDP Growth Models.
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Endogeneity and Robustness Endogeneity and Robustness
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2.6 Concluding Remarks 2.6 Concluding Remarks
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Appendix Description of the Data Appendix Description of the Data
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References References
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Comment - Alan M. Taylor Comment - Alan M. Taylor
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References References
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2 Capital Controls, Sudden Stops, and Current Account Reversals
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Published:May 2007
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Abstract
This chapter uses a broad multicountry data set to examine the link between restrictions on capital mobility and currency crises. A country's degree of trade openness is an important determinant of the growth costs of current account reversals. It is noted that higher capital mobility has not been linked with a higher occurrence of banking crises; banking crises have occurred at the same rate in countries with High, Intermediate, and Low capital mobility. There is no clear evidence confirming the view that Low capital mobility countries have a significantly lower incidence of sudden stops or current account reversals. Once a reversal has taken place, countries with a higher degree of capital mobility will experience a deeper drop in growth. The results cast some doubts on the assertion that increased capital mobility has caused heightened macroeconomic vulnerabilities.
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