Determining underlying macroeconomic fundamentals during emerging market crises: Are conditions as bad as they seem?
Mark Aguiar and
Fernando Broner
Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Abstract:
Emerging market crises are characterized by large swings in both macroeconomic fundamentals and asset prices. The economic significance of observed movements in macroeconomic variables is obscured by the brief and extreme nature of crises. In this paper we propose to study the macroeconomic consequences of crises by studying the behavior of “effective” fundamentals, constructed by studying the relative movements of stock prices during crises. We find that these effective fundamentals provide a different picture than that implied by observed fundamentals. First, asset prices often reflect expectations of improvement in fundamentals after the initial devaluations; specifically, effective depreciations are positive but not as large as the observed ones. Second, crises vary in their effect on credit market conditions, with investors expecting tightening of credit in some cases (Mexico 1994, Philippines 1997), but loosening of credit in others (Sweden 1992, Korea 1997, Brazil 1999).
Keywords: Currency crises; emerging markets; stock prices; overshooting; credit markets (search for similar items in EconPapers)
JEL-codes: E44 F31 F32 F41 G12 G14 G15 (search for similar items in EconPapers)
Date: 2001-08, Revised 2004-08
New Economics Papers: this item is included in nep-fin, nep-fmk, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://econ-papers.upf.edu/papers/863.pdf Whole Paper (application/pdf)
Related works:
Journal Article: Determining underlying macroeconomic fundamentals during emerging market crises: Are conditions as bad as they seem? (2006) 
Working Paper: Determining Underlying Macroeconomic Fundamentals during Emerging Market Crises: Are conditions as bad as they seem? (2004) 
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:upf:upfgen:863
Access Statistics for this paper
More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).