NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Short-Term Capital Flows

Dani Rodrik, Andres Velasco

NBER Working Paper No. 7364
Issued in September 1999
NBER Program(s):   IFM

We provide a conceptual and empirical framework for evaluating the effects of short-term capital flows. A simple model of the joint determination of the maturity and cost of external borrowing highlights the role played by self-fulfilling crises. The model also specifies the circumstances under which short-term debt accumulation is socially excessive. The empirical analysis shows that the short-term debt to reserves ratio is a robust predictor of financial crises, and that greater short-term exposure is associated with more severe crises when capital flows reverse. Higher levels of M2/GDP and per-capita income are associated with shorter-term maturities of external debt. The level of international trade does not seem to have any relationship with levels of short-term indebtedness, which suggests that trade credit plays an insignificant role in driving short-term capital flows. Our policy analysis focuses on ways in which potential illiquidity can be avoided.

download in pdf format
   (485 K)

email paper

A non-technical summary of this paper is available in the March 2000 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper is available as PDF (485 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w7364

Published: Pleskovic, Boris and Joseph E. Stiglitz. Annual World Bank Conference on Development Economics. Washington, D.C.: World Bank, 2000.

Users who downloaded this paper also downloaded these:
Kaminsky, Reinhart, and Vegh When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies
Bacchetta and Wincoop Capital Flows to Emerging Markets: Liberalization, Overshooting, and Volatility
Diamond and Rajan w7764 Banks, Short Term Debt and Financial Crises: Theory, Policy Implications and Applications
Reinhart and Reinhart w14321 Capital Flow Bonanzas: An Encompassing View of the Past and Present
Lipsey, Feenstra, Hahn, and Hatsopoulos The Role of Foreign Direct Investment in International Capital Flows
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

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

Contact Us