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Capital sudden stop, savings rate difference and economic growth: evidence based on 49 emerging economies

Yu Ma (Department of Finance, Shandong Technology and Business University, Yantai, China)
Jun Shi (Department of Finance, Shandong Technology and Business University, Yantai, China)
Qiang Ji (Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 7 July 2020

Abstract

Purpose

This paper empirically tests the impact of capital sudden stops on the economic growth using quarterly data from 49 emerging economies.

Design/methodology/approach

This paper applies the GMM dynamic panel estimation method.

Findings

The results show that capital sudden stops can significantly inhibit the economic growth of emerging economies. It was also found that the inhibiting effect on low-savings-rate economies is greater, but less on high-savings-rate economies. In addition, this paper examined the impact of different types of capital sudden stops on economic growth in emerging economies. The results reveal that the impact of sudden stops of direct investment is not significant.

Originality/value

Little existing research considers the impact of capital sudden stops through the perspective of savings rate differences. Based on our research using the GMM model, we argue that capital sudden stops will lead to a decline in investment kinetic energy in emerging economies, and therefore, a decline in economic growth. There are also few studies on the economic effects of capital sudden stops. And the time series model is generally used in a single economy. This paper, however, uses the data from 49 emerging economies and takes the panel approach to more comprehensively study the capital sudden stops of emerging economies.

Keywords

Acknowledgements

The authors acknowledge support from the Key Project of National Social Science Foundation of China under Grants 16AJY026, the National Natural Science Foundation of China under Grants 71974181, 71774152, and Youth Innovation Promotion Association of Chinese Academy of Sciences Grant Y7X0231505.

Citation

Ma, Y., Shi, J. and Ji, Q. (2020), "Capital sudden stop, savings rate difference and economic growth: evidence based on 49 emerging economies", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-11-2019-0962

Publisher

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Emerald Publishing Limited

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