Sudden Stops and COVID-19: Lessons from Mexico’s History

Benigno, Gianluca; Foerster, Andrew; Otrok, Christopher; Rebucci, Alessandro

Journal Article

Sudden Stops and COVID-19: Lessons from Mexico’s History

Abstract: The COVID-19 pandemic produced a sharp contraction in capital flows in emerging markets during the spring of 2020. Such contractions are known as “sudden stops” and historically have been associated with significant downturns in a country’s economic activity. Evidence from Mexico’s financial crisis history suggests that sudden stops tend to exhibit a common pattern: the crisis lasts one to two years before a rapid but partial recovery, followed by years of protracted stagnation.

Keywords: covid-19; Financial crises - Mexico;