TY  - JOUR
AU  - Edwards,Sebastian
TI  - Sequencing of Reforms, Financial Globalization, and Macroeconomic Vulnerability
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14384
PY  - 2008
Y2  - October 2008
DO  - 10.3386/w14384
UR  - http://www.nber.org/papers/w14384
L1  - http://www.nber.org/papers/w14384.pdf
N1  - Author contact info:
Sebastian Edwards
UCLA Anderson Graduate School of Management
110 Westwood Plaza, Suite C508
Box 951481
Los Angeles, CA 90095-1481
Tel: 310/206-6797
Fax: 310/206-5825
E-Mail: sebastian.edwards@anderson.ucla.edu
M1  - published as Sebastian Edwards. "Sequencing of reforms, financial globalization, and macroeconomic vulnerability," in Takeo Hoshi and Takatoshi Ito, organizers, "Financial Globalization, 20th Anniversary Conference, NBER-TCER-CEPR" Journal of the Japanese and International Economies 23(2), June 2009 (Elsevier B.V.) (2009)

AB  - I use a large cross country data set and panel probit analysis to investigate the way in which the interaction between trade and financial openness affect the probability of external crises.  This analysis is related to debate on the adequate sequencing of reform.  I also investigate the role played by current account and fiscal imbalances, contagion, international reserves holdings, and the exchange rate regime as possible determinants of external crises.  The results indicate that relaxing capital controls increases the likelihood of a country experiencing a sudden stop.  Moreover, the results suggest that "financial liberalization first" strategies increase the degree of vulnerability to external crises.  This is particularly the case if this strategy is pursued with pegged exchange rates and if it results in large current account imbalances.
ER  -