Capital controls, exchange rate regimes, and bond-led stops in emerging economies

Abstract

This paper explores the determinants of stop episodes that are led by bond flows in emerging economies. The estimation results reveal that bond-led stop episodes are associated with contagion and domestic factors rather than global factors. The probability of stops is significantly correlated with domestic factors such as bond market size, institutional quality, and real exchange rate overvaluation. Moreover, emerging economies with less flexible exchange-rate regimes and more restrictive capital controls are more likely to experience bond-led stop episodes