What explains output recoveries in developing and emerging market economies after the global financial crisis?

Rolando Avendano and Christian Daude

No 1094, Research Department working papers from CAF Development Bank Of Latinamerica

Abstract: This paper presents a systematic assessment of the macroeconomic factors associated with differences in GDP dynamics in emerging markets in the aftermath of the global financial crisis. We implement a Bayesian Model Averaging approach to explore the drivers of economic resilience – measured by the output recoveries for a group of 40 emerging economies after 2008, which allows us to account for the uncertainty in the model selection of the relevant variables. Out of a large group of variables used in the literature on balance of payments crises and early warning indicators, we find that a reduced set of variables is systematically associated with output dynamics after the crisis. Countries with overvalued currencies, current account deficits and larger external liabilities before the global financial crisis exhibit systematically weaker output recoveries afterwards. These findings are robust to different definitions of output recovery, the distribution of priors and exclusion of potential outliers. There is also some evidence, but less systematic, that de facto financial openness, links to European banks, and trade openness had a negative impact on output recoveries.

Keywords: Desarrollo; Economía; Investigación socioeconómica; Sector financiero (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-fdg and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:dbl:dblwop:1094

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