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How vulnerable are emerging markets to external shocks?

Author

Listed:
  • Almansour, Aseel
  • Aslam, Aqib
  • Bluedorn, John
  • Duttagupta, Rupa

Abstract

This paper finds that external economic conditions have significant effects on emerging market (EM) economies, accounting for up to half of the variance in their growth rates. Stronger growth in advanced economies generates stronger EM growth, more so for those EMs with stronger trade ties with advanced economies and less so for those that are financially more open. Adverse external borrowing shocks hurt EM growth, more so for those with greater financial openness or those with limited policy space. China itself has become an important external driver of growth in other EMs. However, internal factors also matter in determining EM growth, and in the period since the global financial crisis these factors have been hampering growth for some EMs. The persistent dampening effect from internal factors in recent years suggests that trend growth could be affected as well. In sum, EMs may be entering a more challenging period of slower growth in the period ahead, reflecting both external and internal conditions.

Suggested Citation

  • Almansour, Aseel & Aslam, Aqib & Bluedorn, John & Duttagupta, Rupa, 2015. "How vulnerable are emerging markets to external shocks?," Journal of Policy Modeling, Elsevier, vol. 37(3), pages 460-483.
  • Handle: RePEc:eee:jpolmo:v:37:y:2015:i:3:p:460-483
    DOI: 10.1016/j.jpolmod.2015.03.009
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    References listed on IDEAS

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    Cited by:

    1. Feldkircher, Martin & Gruber, Thomas & Huber, Florian, 2017. "Spreading the word or reducing the term spread? Assessing spillovers from euro area monetary policy," Department of Economics Working Paper Series 5554, WU Vienna University of Economics and Business.
    2. repec:eee:jpolmo:v:39:y:2017:i:2:p:307-323 is not listed on IDEAS
    3. repec:eee:jpolmo:v:39:y:2017:i:4:p:680-698 is not listed on IDEAS
    4. Markus Eller & Martin Feldkircher & Florian Huber, 2017. "How would a fiscal shock in Germany affect other European countries? Evidence from a Bayesian GVAR model with sign restrictions," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 54-77.
    5. Martin Feldkircher Author-Email: martin.feldkircher@oenb.at Author-WorkPlace-Name: Oesterreichische Nationalbank (OeNB) & Thomas Gruber Author-Email: thomas.gruber@oenb.at Author-WorkPlace-Name: Oeste, 2017. "Spreading the word or reducing the term spread? Assessing spillovers from euro area monetary policy," Department of Economics Working Papers wuwp248, Vienna University of Economics and Business, Department of Economics.
    6. Günçavdı, Öner & Suna Kayam, Saime, 2017. "Unravelling the structure of Turkish exports: Impediments and policy," Journal of Policy Modeling, Elsevier, vol. 39(2), pages 307-323.
    7. repec:eee:jpolmo:v:39:y:2017:i:6:p:1065-1085 is not listed on IDEAS

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