A Gathering of Storms: The Impact of COVID-19 Pandemic on the Balance of Payments of Emerging Markets and Developing Economies (EMDEs)

Pablo Bortz, Gabriel Michelena and Fernando Toledo

International Journal of Political Economy, 2020, vol. 49, issue 4, 318-335

Abstract: The aim of this article is to track the impact of the COVID-19 pandemic crisis on EMDEs focusing on the performance of their Balance of Payments (BOPs). EMDEs are facing simultaneous hits in their BOPs as they try to cope with the domestic impact of the COVID-19 pandemic. Those impacts call for a rethinking of some aspects of the Keynesian Approach to BOPs while strengthening the view of international financial markets as hierarchical and volatile institutions. The external impacts can be summarized in four channels: (i) The unprecedented capital flight which has led to depreciation, scarcity of hard currency, debt problems and rising spreads in domestic currency; (ii) the fall in commodity prices, a major component of the export basket in most EMDEs; (iii) the contraction in global aggregate demand and supply, which together with lower commodity prices lead to reduced export earnings; and (iv) the decrease in remittances, a major supply of hard currency in several EMDEs and Low-Income Countries (LICs). The concomitant impact of these “storms” has limited the capabilities and efficiency of governments to adopt fiscal and monetary stimulus packages and to respond to the sanitary requirements. Government reactions are also clogged by the large weight of the informal sector in EMDEs.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1080/08911916.2020.1857586 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:ijpoec:v:49:y:2020:i:4:p:318-335

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MIJP20

DOI: 10.1080/08911916.2020.1857586

Access Statistics for this article

More articles in International Journal of Political Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().