Growth Accelerations and Reversals in Emerging Market and Developing Economies: The Role of External Conditions

Abstract

This paper investigates how country-specific external demand, external financial conditions,and terms of trade affect medium-term growth in Emerging Market and DevelopingEconomies and the occurrence of growth accelerations and reversals. The importance ofcountry-specific external conditions for medium-term growth has increased over time-inparticular, the growing contribution of external financial conditions accounts for one-third ofthe increase in average income per capita growth between 1995-2004 and 2005-14. Strongerexternal demand and financial conditions significantly increase the probability of growthaccelerations, while a strengthening of any of the three conditions significantly decreases theprobability of reversals.

Keywords: Economic growth, Emerging markets, Developing Economies, External Conditions, Economic Growth of Open Economies, Globalization: Economic Development

JEL Classification: O47, F43, F63