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The Transformation and Performance of Emerging Market Economies Across the Great Divide of the Global Financial Crisis

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  • Michael D. Bordo
  • Pierre Siklos

Abstract

The process of central bank (CB) evolution by emerging market economies (EMEs), including central bank independence (CBI) and transparency (CBT), converged towards that of the advanced economies (AEs) before the Global Financial Crisis (GFC) of 2007-2008. It was greatly aided by the adoption of inflation targeting. In this paper we evaluate this convergence process for a representative set of EMEs and AEs since the disruption of the GFC. We use several measures of institutional development (changes in CBI, changes in CBT, changes in a new index of institutional resilience and changes in a new measure of CB credibility). We then use panel VARs based on both factor models and observed data to ascertain the impact of global shocks, financial shocks, trade shocks and credibility shocks on the EMEs versus the AEs. We find that although some EMEs did maintain the levels of CBI and CBT that they had before the crisis, on average they experienced a decline in institutional resilience to shocks and in the quality of their governance. Moreover it appears that CB credibility in EMEs was more fragile than was the case for the AEs in the face of the global shocks (from the US) than was the case for the AEs.

Suggested Citation

  • Michael D. Bordo & Pierre Siklos, 2019. "The Transformation and Performance of Emerging Market Economies Across the Great Divide of the Global Financial Crisis," NBER Working Papers 26342, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26342
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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F0 - International Economics - - General

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