Capital sudden stop, savings rate difference and economic growth: evidence based on 49 emerging economies
International Journal of Emerging Markets
ISSN: 1746-8809
Article publication date: 6 July 2020
Issue publication date: 14 October 2021
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. (2021), "Capital sudden stop, savings rate difference and economic growth: evidence based on 49 emerging economies", International Journal of Emerging Markets, Vol. 16 No. 8, pp. 2117-2135. https://doi.org/10.1108/IJOEM-11-2019-0962
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited