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Slowdown in Emerging Markets: Rough Patch or Prolonged Weakness?

Author

Listed:
  • Tatiana Didier

    () (World Bank, Operations and Strategy Group)

  • M. Ayhan Kose

    () (World Bank, Development Prospects Group; Brookings Institution; CEPR; CAMA)

  • Franziska Ohnsorge

    () (World Bank, Development Prospects Group)

  • Lei Sandy Ye

    () (World Bank, Development Prospects Group)

Abstract

Emerging markets (EM) face their fifth consecutive year of slowing growth and a possibly longer period of sluggish performance than previously thought. This paper presents a comprehensive analysis of the nature of and the appropriate policy responses to the growth slowdown in EM. It reports three main results. First, the slowdown is synchronous and protracted, affecting a sizable number of EM, especially large ones. Second, it has been driven by both external factors, including weak world trade, low commodity prices, and tightening financial conditions; and domestic factors, including slowdown in productivity growth, bouts of policy uncertainty, and an erosion of policy buffers. Both structural and cyclical factors have contributed to the slowdown. Third, the room for accommodative cyclical fiscal and monetary policies is limited in many EM, lending urgency to putting in place structural reforms to upgrade governance structures, improve business environments, raise human and physical capital, and manage demographic pressures.

Suggested Citation

  • Tatiana Didier & M. Ayhan Kose & Franziska Ohnsorge & Lei Sandy Ye, 2015. "Slowdown in Emerging Markets: Rough Patch or Prolonged Weakness?," Koç University-TUSIAD Economic Research Forum Working Papers 1529, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:1529
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    References listed on IDEAS

    as
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    Cited by:

    1. Raju Huidrom & M. Ayhan Kose & Franziska L. Ohnsorge, 2016. "Challenges of Fiscal Policy in Emerging and Developing Economies," Koç University-TUSIAD Economic Research Forum Working Papers 1604, Koc University-TUSIAD Economic Research Forum.
    2. Kose,Ayhan & Ohnsorge,Franziska Lieselotte & Ye,Lei Sandy & Islamaj,Ergys, 2017. "Weakness in investment growth : causes, implications and policy responses," Policy Research Working Paper Series 7990, The World Bank.
    3. Belke, Ansgar & Dreger, Christian & Dubova, Irina, 2016. "On the exposure of the BRIC countries to global economic shocks," Ruhr Economic Papers 622, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Raju Huidrom & M. Ayhan Kose & Franziska L. Ohnsorge, 2017. "How Important are Spillovers from Major Emerging Markets?," Koç University-TUSIAD Economic Research Forum Working Papers 1710, Koc University-TUSIAD Economic Research Forum.
    5. World Bank Group, 2016. "Commodity Markets Outlook, January 2016," World Bank Publications, The World Bank, number 23680, July.
    6. World Bank Group, 2017. "Global Economic Prospects, January 2017," World Bank Publications, The World Bank, number 25823, July.

    More about this item

    Keywords

    emerging markets; growth slowdown; policy space; monetary policy; fiscal policy; structural reforms.;

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F6 - International Economics - - Economic Impacts of Globalization
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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