A second reason is the accumulation of financial imbalances in the private sector, which in the event of a crisis can become public debt. Under these conditions a country may lose access to the financial markets. What is described in the literature as a “sudden stop” in the influx of capital occurs.
This phenomenon is typical of developing countries, which borrow in foreign currency to facilitate the inflow of capital. In advanced countries this type of problem is rare because the debt is generally denominated in the national currency, and if need be the central bank moves in and funds the Treasury, replacing private operators.