Crises in Some Emerging Economy and Its Contagion Effect

Delgerjargal Chuluunbayar

MPRA Paper from University Library of Munich, Germany

Abstract: The interdependence of countries may have positive impacts on countries development overall, however, any economic difficulties are no longer one countries issue, which clearly can be seen from many crises such as Asian Financial Crisis (1997), Russian debt crisis (1998), the Global Financial Crisis (2008) and Eurozone debt crises. Contagion effects have been studied extensively, however, uncertainty remains regarding the interrelationship between countries and the scale of crisis impacts (Bird et al. 2017). Meanwhile, crisis symptoms are occurring repeatedly across countries. The latest examples are for the biggest emerging markets: the Russian financial crises (2014-2017); the Brazilian political and economic crises (2014-2016); Turkey financial and economic crises (since 2018). The effect of crises in the biggest emerging markets on their trade partners and the global economy is still an open question. This paper seeks to illustrate the quantifiable effects of an emerging market shock by conducting a simulation centred on four countries - Argentina, Brazil, Russia and Turkey using the G-Cubed model. From the simulation results, there will be severe loss in those four countries and short-run significant contractions in all other countries. Overall, the global economy and total wealth of the people will be worsened in the long run.

Keywords: Contagion effect; crises; emerging economy; G-Cubed (search for similar items in EconPapers)
JEL-codes: F4 F47 F62 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-cis
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