Detrended Total Factor Productivity (TFP), net of changes in capital utilization, fell by 3.3% after the Korean 1997 financial crisis. We construct a small open economy model that accounts for 30.0% of the fall in response to a sudden stop of capital inflows and an increase in international...

Our study complements existing studies of the degree of capital mobility based on an examination of explicit capital controls (e.g. Miniane 2004), the quantity of capital flows (Obstfeld & Taylor 2004), the relationship between investment and savings (e.g. Feldstein & Horioka 1980), cross...