@techreport{NBERw6007,
 title = "Hot Money",
 author = "V. V. Chari and Patrick Kehoe",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "6007",
 year = "1997",
 month = "April",
 URL = "http://www.nber.org/papers/w6007",
 abstract = {The conventional wisdom is that capital flows between developing countries and developed countries are more volatile than can be justified by fundamentals.  In this paper we construct a simple model in which frictions in international financial markets in combination with standard debt-default problems lead to volatile capital flows.  These flows act as tests of fire for borrowing countries.  If a country survives this test, its reputation is enhanced and future capital flows become less volatile.  Failing this test is associated with a loss of reputation and a decline in the amount of capital flows.},
}