NDLI: On the Determinants of Surges and Stops in Foreign Loans: An Empirical Investigation

Content Provider	Springer Nature Link
Author	Baek, Seung Gwan Song, Chi Young
Copyright Year	2015
Abstract	This paper examines the determinants of surge and stop episodes in foreign loans using quarterly data from 55 countries covering 1990Q1 to 2011Q4. The estimation results show that, first, global, contagion and domestic factors are all significantly associated with both loan-led surge and stop episodes. Second, domestic factors are more relevant to stops than to surges and are associated more strongly with episodes in emerging countries than with those in advanced countries. Third, global risk and domestic growth shock are most consistent and important in predicting both types of episodes. Fourth, financial linkage is the most important contagion channel in the occurrence of loan-led episodes. Fifth, capital control is not a useful tool for avoiding either type of episode and may actually increase their likelihood. Finally, stops in emerging countries are strongly related to macroeconomic fundamentals such as inflation, current account balance, net foreign assets, real exchange rate, and previous occurrence of surge episodes. Our results strongly suggest that emerging countries with lower institutional quality levels are more likely to experience both surges and stops.
Starting Page	405
Ending Page	445
Page Count	41
File Format	PDF
ISSN	09237992
Journal	Open Economies Review
Volume Number	27
Issue Number	3
e-ISSN	1573708X
Language	English
Publisher	Springer US
Publisher Date	2015-10-07
Publisher Place	New York
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Surge Stop Foreign loan Global factor Domestic factor Contagion Institutional quality International Economics Development Economics European Integration Macroeconomics/Monetary Economics//Financial Economics Economic Policy
Content Type	Text
Resource Type	Article
Subject	Economics and Econometrics

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
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4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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