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The Great Retrenchment: International Capital Flows During The Global Financial Crisis

Date Added: Sep 2010
Format: PDF

The current crisis saw an unprecedented collapse in international capital flows after years of rising financial globalization. The authors identify the stylized facts and main drivers of this development. The retrenchment in international capital flows is a highly heterogeneous phenomenon: first across time, being especially dramatic in the wake of the Lehman Brothers' failure, second across types of flows, with banking flows being the hardest hit due to their sensitivity of risk perception, and third across regions, with emerging economies experiencing a shorter-lived retrenchment than developed economies.