SUDDEN STOP

Abrupt slowdown in net capital flows into an economy, described by swift reversals of international capital flows, sharp decline in production and consumption, and correction in prices. This can be ignited when foreign investors cut down or stop capital inflows into an economy, or local residents pull their money out of the economy, resulting to capital outflows. Since these are commonly preceded by robust expansions, pushing asset prices significantly higher, their occurrence can have a very adverse effect on the economy. This may be followed by currency crisis or banking crisis, or both.

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