External Finance, Sudden Stops, and Financial Crisis [electronic resource] : What is Different This Time? / F Gulcin Ozkan.
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TextSeries: IMF Working Papers; Working Paper ; No. 10/158Publication details: Washington, D.C. : International Monetary Fund, 2010Description: 1 online resource (34 p.)ISBN: 1455201413 :ISSN: 1018-5941Subject(s): Domestic Economy | Domestic Goods | Entrepreneur | Entrepreneurs | International Finance | Macroeconomic Aspects of International Trade and Finance | China, People's Republic of | Singapore | Taiwan Province of China | Turkey | United StatesAdditional physical formats: Print Version:: External Finance, Sudden Stops, and Financial Crisis : What is Different This Time?Online resources: IMF e-Library | IMF Book Store Abstract: This paper develops a two-country DSGE model to investigate the transmission of a global financial crisis to a small open economy. We find that economies hit by a sudden stop arising from financial distress in the global economy are likely to face a more prolonged crisis than sudden stop episodes of domestic origin. Moreover, in contrast to the existing literature, our results suggest that the greater a country's trade integration with the rest of the world, the greater the response of its macroeconomic aggregates to a sudden stop of capital flows.
This paper develops a two-country DSGE model to investigate the transmission of a global financial crisis to a small open economy. We find that economies hit by a sudden stop arising from financial distress in the global economy are likely to face a more prolonged crisis than sudden stop episodes of domestic origin. Moreover, in contrast to the existing literature, our results suggest that the greater a country's trade integration with the rest of the world, the greater the response of its macroeconomic aggregates to a sudden stop of capital flows.
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