Openness to trade is one factor that has been identified as determining whether a country is prone to sudden stops in capital inflows. Several authors have offered empirical evidence that having a large tradable sector reduces the contraction necessary to adjust to a given cut-off in funding....

This paper estimates the impact of relative price volatility on sector-level investment allocation using a panel of 65 countries with data for 26 manufacturing industries over the period 1985–2003. Results indicate that volatility distorts efficient investment allocation in that investment is...