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The role of domestic fundamentals on the economic vulnerability of emerging markets

  • Rocha, Katia
  • Moreira, Ajax

This paper empirically evaluates policies that can potentially reduce the economic vulnerability of emerging market economies. Through panel data estimation on a group of 23 countries, we relate sovereign spreads to global risk shocks, and explore the argument suggested by Calvo (2003) which focuses on macroeconomic fundamentals as multipliers of external shocks. The results support policies towards financial liberalization, public debt management, consistent economic growth, development of the domestic financial market and improvements in governance indicators. We argue that those policies were crucial for the projected rapid economic rebound of the emerging market economies facing the global crisis of 2007-2009.

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File URL: http://www.sciencedirect.com/science/article/B6W69-4XSTD67-1/2/6d7a793c6d6766ca74c3d4762670bb3a
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Article provided by Elsevier in its journal Emerging Markets Review.

Volume (Year): 11 (2010)
Issue (Month): 2 (June)
Pages: 173-182

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Handle: RePEc:eee:ememar:v:11:y:2010:i:2:p:173-182
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620356

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  1. Andritzky, Jochen R. & Bannister, Geoffrey J. & Tamirisa, Natalia T., 2007. "The impact of macroeconomic announcements on emerging market bonds," Emerging Markets Review, Elsevier, vol. 8(1), pages 20-37, March.
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  10. Sebastian Edwards, 2005. "Capital Controls, Sudden Stops and Current Account Reversals," NBER Working Papers 11170, National Bureau of Economic Research, Inc.
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  14. Maurice Obstfeld, 1992. "Risk-Taking, Global Diversification, and Growth," NBER Working Papers 4093, National Bureau of Economic Research, Inc.
  15. Steven B. Kamin & Karsten von Kleist, 1999. "The evolution and determinants of emerging market credit spreads in the 1990s," International Finance Discussion Papers 653, Board of Governors of the Federal Reserve System (U.S.).
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  17. Patrick McGuire & Martijn A Schrijvers, 2003. "Common factors in emerging market spreads," BIS Quarterly Review, Bank for International Settlements, December.
  18. Ebner, André, 2009. "An empirical analysis on the determinants of CEE government bond spreads," Emerging Markets Review, Elsevier, vol. 10(2), pages 97-121, June.
  19. Steven B. Kamin & K von Kleist, 1999. "The evolution and determinants of emerging markets credit spreads in the 1990s," BIS Working Papers 68, Bank for International Settlements.
  20. Sanjeev Gupta & Amine Mati & Emanuele Baldacci, 2008. "Is it (Still) Mostly Fiscal? Determinants of Sovereign Spreads in Emerging Markets," IMF Working Papers 08/259, International Monetary Fund.
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