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The Impact of the Great Recessionon Emerging Markets

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Author Info

  • Ferhan Salman
  • Mali Chivakul
  • Ricardo Llaudes

Abstract

This paper examines the impact of the recent global crisis on emerging market economies (EMs). Our cross-country analysis shows that the impact of the crisis was more pronounced in those EMs that had initial weaker fundamentals and greater financial and trade linkages. This effect is observed along a number of dimensions, such as growth, stock market performance, sovereign spreads, and credit growth. This paper also shows that during this crisis, pre-crisis reserve holdings helped to mitigate the initial growth collapse. This finding contrasts with other studies that fail to find a significant relationship between reserves and the growth decline. This paper argues that our preferred measure of impact is a more accurate reflection of the true impact of the crisis on EMs.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/237.

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Length: 34
Date of creation: 01 Oct 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/237

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Keywords: Emerging markets; Credit; Economic growth; Economic recession; Global Financial Crisis 2008-2009; Sovereign debt; pre-crisis; current account; external debt; short-term debt; credit booms; external financing; financial crisis; banking crises; reserve holdings; current account deficit; recession; current account balance; public debt; recessions; currency crises; public sector debt; external liabilities; financial integration; current account deficits; financial crises; early warning system; global economic crisis; systemic financial crisis; global recession; economic crisis; reserve countries; short term debt; post-crisis period; liquidity injection; global recessions; corporate sector; crisis probabilities; country comparison; capital account crisis; bank liquidity; credit boom; reserve holding; private credit; asian crisis; private banks; pre - crisis; external public sector debt; crisis episodes; global financial crisis; reserve accumulation;

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References

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  1. Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," NBER Working Papers 13882, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Camilo González & Luisa F. Silva & Carmiña O. Vargas & Andrés M. Velasco, 2013. "An exploration on interbank markets and the operational framework of monetary policy in Colombia," Borradores de Economia 782, Banco de la Republica de Colombia.
  2. Antonio Francisco A. Silva Jr, 2011. "The Self-insurance Role of International Reserves and the 2008-2010 Crisis," Working Papers Series 256, Central Bank of Brazil, Research Department.
  3. Aizenman, Joshua & Pasricha, Gurnain Kaur, 2010. "Determinants of Financial Stress and Recovery during the Great Recession," Santa Cruz Department of Economics, Working Paper Series qt5cf9t5cd, Department of Economics, UC Santa Cruz.
  4. Kathryn M.E. Dominguez & Yuko Hashimoto & Takatoshi Ito, 2011. "International Reserves and the Global Financial Crisis," NBER Working Papers 17362, National Bureau of Economic Research, Inc.
  5. Javier Gómez Restrepo & Juan Sebastián Rojas Bohórquez, 2013. "Assessing Reserve Adequacy: The Colombian Case," Borradores de Economia 781, Banco de la Republica de Colombia.
  6. Javier Gómez Restrepo & Juan Sebastián Rojas Bohorquez, 2013. "Assessing Reserve Adequacy: The Colombian Case," BORRADORES DE ECONOMIA 010981, BANCO DE LA REPÚBLICA.
  7. Frankel, Jeffrey A. & Saravelo, George, 2011. "Can Leading Indicators Assess Country Vulnerability? Evidence from the 2008-09 Global Financial Crisis," Scholarly Articles 5027952, Harvard Kennedy School of Government.
  8. Nenovski, Tome, 2012. "Lessons from world economic crises: cleaning, remodeling and harmonizing the economy," MPRA Paper 42249, University Library of Munich, Germany.
  9. Nenovski, Tome, 2012. "Post crisis Remodeling of the Economy for the Sustainable Growth of South Eastern European Countries," MPRA Paper 42257, University Library of Munich, Germany.
  10. Essers, Dennis, 2012. "Democracy and External Shock Resilience in Developing Countries. Evidence from the Great Recession," IOB Working Papers 2012.02, Universiteit Antwerpen, Institute of Development Policy and Management (IOB).
  11. International Monetary Fund, 2011. "International Reserve Adequacy in Central America," IMF Working Papers 11/144, International Monetary Fund.
  12. Furceri, Davide & Zdzienicka, Aleksandra, 2012. "Banking Crises and Short and Medium Term Output Losses in Emerging and Developing Countries: The Role of Structural and Policy Variables," World Development, Elsevier, vol. 40(12), pages 2369-2378.
  13. Jean Pierre Allegret, 2012. "Responses of Monetary Authorities in Emerging Economies to International Financial Crises: What Do We Really know?," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 3-32.
  14. Marcelo Bianconi & Joe A. Yoshino & Mariana O. Machado de Sousa, 2011. "BRIC and the U.S. Financial Crisis: An Empirical Investigation of Stocks and Bonds Markets," Discussion Papers Series, Department of Economics, Tufts University 0764, Department of Economics, Tufts University.
  15. José Osler Alzate Mahecha, 2013. "Sudden stops in emerging markets: How to minimize their impact on GDP?," DOCUMENTOS CEDE 010547, UNIVERSIDAD DE LOS ANDES-CEDE.
  16. Carlos Capistrán & Gabriel Cuadra & Manuel Ramos Francia, 2011. "Policy Response to External Shocks: Lessons from the Crisis," Working Papers 2011-14, Banco de México.

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