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What Drives Stops in Cross-Border Bond Flows?

School of Economics, Hongik University, 94 Wausan-ro, Mapo-gu, Seoul 04066, Korea
Department of Commerce and Finance, Kookmin University, 77 Jeongneung-ro, Seongbuk-gu, Seoul 02707, Korea
Author to whom correspondence should be addressed.
Sustainability 2019, 11(14), 3763;
Received: 9 May 2019 / Revised: 3 July 2019 / Accepted: 6 July 2019 / Published: 10 July 2019
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
PDF [280 KB, uploaded 10 July 2019]


This paper empirically explores the determinants of stop episodes driven by bond flows using quarterly data from 38 economies over the period 1995–2011. Drastic bond-led stop episodes may greatly destabilize domestic financial markets and lead to financial crisis, threatening the sustainability of the financial system. Using the complementary log–log regression method, we found that bond-led stop episodes were associated with contagion and domestic factors rather than global factors. The results of our estimation showed that the probability of bond-led stop episodes was higher in countries with larger financial markets or with more overvalued real exchange rates. The main policy implications of our results, particularly for emerging economies, are that bond-led stop episodes were less likely to occur in countries with higher levels of institutional quality, lower capital account restrictions, or more flexible exchange-rate regimes. Finally, we found that capital control played a relatively greater role in predicting bond-led stops in emerging economies than did exchange-rate regimes. View Full-Text
Keywords: Bond; stops; capital controls; exchange-rate regimes; contagion; financial depth Bond; stops; capital controls; exchange-rate regimes; contagion; financial depth
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

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Baek, S.-G.; Song, C.-Y. What Drives Stops in Cross-Border Bond Flows? Sustainability 2019, 11, 3763.

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