NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Relative Price Volatility Under Sudden Stops: The Relevance of Balance Sheet Effects

Guillermo A. Calvo, Alejandro Izquierdo, Rudy Loo-Kung

NBER Working Paper No. 11492
Issued in July 2005
NBER Program(s):   IFM

Sudden Stops are associated with increased volatility in relative prices. We introduce a model based on information acquisition to rationalize this increased volatility. An empirical analysis of the conditional variance of the wholesale price to consumer price ratio using panel ARCH techniques confirms the relevance of Sudden Stops and potential balance-sheet effects as key determinants of relative-price volatility, where balance-sheet effects are captured by the interaction of a proxy for potential changes in the real exchange rate (linked to the degree of external leverage of the absorption of tradable goods) and a measure of domestic liability dollarization.

download in pdf format
   (512 K)

email paper

Published: Calvo, Guillermo A., Alejandro Izquierdo and Rudy Loo-Kung. "Relative Price Volatility Under Sudden Stops: The Relevance Of Balance Sheet Effects," Journal of International Economics, 2006, v69(1,Jun), 231-254.

This paper is available as PDF (512 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us