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Duration of sudden stop spells: A hazard model approach
Author(s) -
Bandaogo Mahama Samir,
Chen Yuchin
Publication year - 2020
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12443
Subject(s) - sudden stop , duration (music) , economics , hazard ratio , hazard , econometrics , hazard model , capital flows , statistics , mathematics , confidence interval , physics , microeconomics , profit (economics) , chemistry , organic chemistry , acoustics
Using a hazard‐based duration model, we analyze the determinants of the duration of a period of sudden stop, which is defined as a drop in capital inflow by two standard deviations, for at least two consecutive quarters. The hazard model estimates the conditional probability that the country exits the sudden stop today given that it experienced one until the end of last period. We find that a higher ratio of foreign exchange reserves to short‐term external debt shortens the duration of sudden stops. We also find that a higher global economic growth rate tends to shorten sudden stop spells. Our results are robust to various alternative specifications.