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The Cross-Country Incidence of the Global Crisis

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  • Gian-Maria Milesi-Ferretti
  • Philip R. Lane

Abstract

We examine whether the cross-country incidence and severity of the 2008-2009 global recession is systematically related to pre-crisis macroeconomic and financial factors. We find that the pre-crisis level of development, increases in the ratio of private credit to GDP, current account deficits, and openness to trade are helpful in understanding the intensity of the crisis. International risk sharing did little to shield domestic demand from the country-specific component of output declines, while those countries with large pre-crisis current account deficits saw domestic demand fall by much more than domestic output during the crisis.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/171.

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Length: 39
Date of creation: 01 Jul 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/171

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Keywords: Global Financial Crisis 2008-2009; Current account deficits; Economic growth; Consumption; Demand; Economic integration; Financial crisis; Cross country analysis; output growth; private credit; current account balance; short-term debt; domestic demand; trading partners; oil exporters; exchange rate regime; trade openness; crisis countries; export growth; net external liabilities; world trade; currency crises; domestic production; external position; domestic consumption; net debt; oil prices; output volatility; domestic agents; external debt; exchange rate regimes; international trade; external financing; commodity exporters; commodity prices; external borrowing; balance of payments; investment goods; external trade; net debtor; external credit; economic outcomes; bilateral trade; crisis ? countries; border trade; current account adjustment; domestic shocks; net external debt; transmission of shocks; terms of trade; international borrowing; public debt; exporting countries; asset market;

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  1. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
  2. Michael B Devereux & James Yetman, 2010. "Financial deleveraging and the international transmission of shocks," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 274-298 Bank for International Settlements.
  3. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, American Economic Association, vol. 89(3), pages 473-500, June.
  4. Acharya, Viral V & Schnabl, Philipp & Suarez, Gustavo, 2012. "Securitization Without Risk Transfer," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8769, C.E.P.R. Discussion Papers.
  5. Markus K. Brunnermeier, 2009. "Deciphering the Liquidity and Credit Crunch 2007-2008," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 23(1), pages 77-100, Winter.
  6. Erik Berglof & Yevgeniya Korniyenko & Alexander Plekhanov & Jeromin Zettelmeyer, 2010. "Understanding the Crisis in Emerging Europe," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, Policy Research Institute, Ministry of Finance Japan, vol. 6(6), pages 985-1008, September.
  7. Gupta, Poonam & Mishra, Deepak & Sahay, Ratna, 2007. "Behavior of output during currency crises," Journal of International Economics, Elsevier, Elsevier, vol. 72(2), pages 428-450, July.
  8. Giannone, Domenico & Lenza, Michele & Reichlin, Lucrezia, 2010. "Market freedom and the global recession," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7884, C.E.P.R. Discussion Papers.
  9. Olivier J. Blanchard & Mitali Das & Hamid Faruqee, 2010. "The Initial Impact of the Crisis on Emerging Market Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(1 (Spring), pages 263-323.
  10. Kose, M. Ayhan & Prasad, Eswar S. & Terrones, Marco E., 2009. "Does financial globalization promote risk sharing?," Journal of Development Economics, Elsevier, Elsevier, vol. 89(2), pages 258-270, July.
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