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

Era Dabla-Norris and Yasemin Bal Gündüz

World Development, 2014, vol. 59, issue C, 360-378

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.

Keywords: vulnerability index; growth crises; low-income countries; external shocks (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:59:y:2014:i:c:p:360-378

DOI: 10.1016/j.worlddev.2014.02.001

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