Leverage Cycles, Growth Shocks, and Sudden Stops in Capital Inflows

Using a quarterly panel of 98 advanced as well emerging and developing countries from 1990 to 2017, this paper shows that domestic variables are significantly related the probability incurring sharp reversals in capital inflows controlling for global push factors. In particular, negative growth shocks combined with high levels leverage private sector significant determinant sudden stops. This is line real business cycle models including an occasionally binding credit constraint income trend shocks.