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Exogenous Shocks and Growth Crises in Low-Income Countries: A Vulnerability Index

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  • Dabla-Norris, Era
  • Bal Gündüz, Yasemin

Abstract

This paper develops a new index which provides early warning signals of a growth crisis in the event of large external shocks in low-income countries (LICs). Multivariate regression analysis and a univariate signaling approach are used to map information from a parsimonious set of underlying policy, structural, and institutional indicators into a composite vulnerability index. Both the in-sample and out-of-sample predictive power of the index are high. In particular, it explains well the growth crises observed in LICs during the global financial crisis.

Suggested Citation

  • Dabla-Norris, Era & Bal Gündüz, Yasemin, 2014. "Exogenous Shocks and Growth Crises in Low-Income Countries: A Vulnerability Index," World Development, Elsevier, vol. 59(C), pages 360-378.
  • Handle: RePEc:eee:wdevel:v:59:y:2014:i:c:p:360-378
    DOI: 10.1016/j.worlddev.2014.02.001
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    References listed on IDEAS

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    Cited by:

    1. repec:gam:jsusta:v:8:y:2015:i:1:p:17:d:61294 is not listed on IDEAS
    2. Kelbesa Megersa & Danny Cassimon, 2015. "Public Debt, Economic Growth, and Public Sector Management in Developing Countries: Is There a Link?," Public Administration & Development, Blackwell Publishing, vol. 35(5), pages 329-346, December.
    3. Megersa, kelbesa & Cassimon, Danny, 2016. "Debt Sustainability and direction of trade: What does Africa’s shifting engagement with BRIC and OECD tells us?," MPRA Paper 76581, University Library of Munich, Germany.
    4. Abiad, Abdul & Bluedorn, John & Guajardo, Jaime & Topalova, Petia, 2015. "The Rising Resilience of Emerging Market and Developing Economies," World Development, Elsevier, vol. 72(C), pages 1-26.
    5. Bal Gündüz, Yasemin, 2016. "The Economic Impact of Short-term IMF Engagement in Low-Income Countries," World Development, Elsevier, vol. 87(C), pages 30-49.
    6. repec:eee:riibaf:v:45:y:2018:i:c:p:15-29 is not listed on IDEAS
    7. Olumuyiwa S Adedeji & Calixte Ahokpossi & Claudio Battiati & Mai Farid, 2016. "A Probabilistic Approach to Fiscal Space and Prudent Debt Level; Application to Low-Income Developing Countries," IMF Working Papers 16/163, International Monetary Fund.
    8. Samuel BATES & Valérie ANGEON, 2015. "Promoting The Sustainable Development Of Small Island Developing States: Insights From Vulnerability And Resilience Analysis," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 42, pages 15-29.
    9. Jingxiao Zhang & Haiyan Xie & Klaus Schmidt & Hui Li, 2015. "A New Systematic Approach to Vulnerability Assessment of Innovation Capability of Construction Enterprises," Sustainability, MDPI, Open Access Journal, vol. 8(1), pages 1-25, December.
    10. Isha Agrawal & Rupa Duttagupta & Andrea Presbitero, 2017. "International Commodity Prices and Domestic Bank Lending in Developing Countries," IMF Working Papers 17/279, International Monetary Fund.
    11. repec:wsi:jicepx:v:08:y:2017:i:01:n:s1793993317500053 is not listed on IDEAS
    12. Angeon, Valérie & Bates, Samuel, 2015. "Reviewing Composite Vulnerability and Resilience Indexes: A Sustainable Approach and Application," World Development, Elsevier, vol. 72(C), pages 140-162.

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