Slowdown in Emerging Markets: Rough Patch or Prolonged Weakness?

67 Pages Posted: 14 Jan 2016 Last revised: 22 Jan 2016

See all articles by Tatiana Didier

Tatiana Didier

World Bank

M. Ayhan Kose

World Bank; Brookings Institution; Centre for Economic Policy Research (CEPR); Australian National University (ANU)

Franziska Ohnsorge

World Bank

Lei Sandy Ye

World Bank

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Date Written: January 12, 2016

Abstract

Emerging markets (EM) face their fifth consecutive year of slowing growth and a possibly longer period of sluggish performance than previously thought. This paper presents a comprehensive analysis of the nature of and the appropriate policy responses to the growth slowdown in EM. It reports three main results. First, the slowdown is synchronous and protracted, affecting a sizable number of EM, especially large ones. Second, it has been driven by both external factors, including weak world trade, low commodity prices, and tightening financial conditions; and domestic factors, including slowdown in productivity growth, bouts of policy uncertainty, and an erosion of policy buffers. Both structural and cyclical factors have contributed to the slowdown. Third, the room for accommodative cyclical fiscal and monetary policies is limited in many EM, lending urgency to putting in place structural reforms to upgrade governance structures, improve business environments, raise human and physical capital, and manage demographic pressures.

Keywords: Emerging markets, growth slowdown, policy space, monetary policy, fiscal policy, structural reforms

JEL Classification: E60, F6, F43, O4, O43

Suggested Citation

Didier, Tatiana and Kose, M. Ayhan and Ohnsorge, Franziska and Ye, Lei Sandy, Slowdown in Emerging Markets: Rough Patch or Prolonged Weakness? (January 12, 2016). CAMA Working Paper 1/2016, Available at SSRN: https://ssrn.com/abstract=2714651 or http://dx.doi.org/10.2139/ssrn.2714651

Tatiana Didier

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States
(202)458-1525 (Phone)

M. Ayhan Kose (Contact Author)

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Brookings Institution

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Australian National University (ANU)

Canberra, Australian Capital Territory 2601
Australia

Franziska Ohnsorge

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Lei Sandy Ye

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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