| “Sudden stops” of international capital inflows refers to the phenomenon that a country’s capital inflows suffer from a sudden slowdown, which are typically accompanied by large devastated economy. The incidence of sudden stops often results in the turbulence and panics in financial markets, which are always followed by asset prices depreciation, currency devaluation, output reduction and substantial economy recession, etc. The research in this paper plays a guidance function for the design of system environment construction and financial openness policy, and the conclusion could provide theoretical basis and empirical support for countries to determine the timing of policy implementation.Based on a dataset which covers 106 countries with a time span from 1995 to 2012, Logistic and Possion regression models are utilized to investigate whether sudden stops are influenced by financial openness and the institutional environment of politics, economy and culture, which are characterized by World Governance Indicators, Index of Economic Freedom and Hofstede’s cultural dimensions. Empirical results reveal that:(1)The improvement of political institutional environment can significantly reduce the possibility of sudden stops in current period.(2)We have found an inverted U-shaped relationship between the economic liberalization and the current incidence of sudden stops. Furthermore, the improvement of the political institutional environment can directly reduce the risk of capital inflows.(3)Considering the cultural institutional environment, a positive correlation was found between the uncertainty avoidance culture and the frequency of sudden stops.(4)Our investigation indicates that financial openness can reduce the frequency of sudden stops during the sample period, while it makes no difference on the incidence of that in current period. But its interaction with the political institutional environment has a consequence on it. |
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