International Capital Flow Suddenly Disrupting New Classification And Its Impact On Output

The previous studies on Sudden Stops in capital flows have mainly concentrated on the issue of gross versus net capital inflows,which have different implications on macroeconomic management and financial stability. Policy and research focus their attention on the effects on exchange rates, macroeconomic fluctuations and financial stability.Only a few researches combines net with gross. This paper proposes a new taxonomy of Sudden Stops comprised of six categories with definitions depending on the behavior of gross and net capital flows,such as SSI,SSO,SSN,SSIN,SSON,SSION. The incidence of different types of Sudden Stops is detailed over time and we relate the type of Sudden Stop to real output. This paper analyzes 43 developing and developed countries between 1993q1 and 2014q2. Evidence suggests that Sudden Stops in Net Flows associated with reductions in Gross Inflows are associated with larger falls in output than those where Sudden Starts in Gross Outflows dominate. The paper further contrasts the effects on real output by dividing economies into developed and development ones. It is found that Sudden Stops happen everywhere with more negative effects on output in development economies than in developing ones,however,SSO have positive effects on output.