Relative Price Volatility Under Sudden Stops: The Relevance of Balance Sheet Effects
43 Pages Posted: 29 Aug 2005 Last revised: 1 Mar 2024
Date Written: July 2005
Abstract
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.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Is the 2007 U.S. Sub-Prime Financial Crisis so Different? an International Historical Comparison
By Carmen Reinhart and Kenneth Rogoff
-
The Aftermath of Financial Crises
By Carmen Reinhart and Kenneth Rogoff
-
The Aftermath of Financial Crises
By Carmen Reinhart and Kenneth Rogoff
-
Banking Crises: An Equal Opportunity Menace
By Carmen Reinhart and Kenneth Rogoff
-
Banking Crises: An Equal Opportunity Menace
By Carmen Reinhart and Kenneth Rogoff
-
Government Debt in Emerging Market Countries: A New Data Set
By Olivier Jeanne and Anastasia Guscina
-
By Carmen Reinhart and Kenneth Rogoff
-
By Carmen Reinhart and Kenneth Rogoff