Crises in Emerging Market Economies: A Global Perspective

41 Pages Posted: 8 Jun 2005

See all articles by Guillermo A. Calvo

Guillermo A. Calvo

Columbia University - School of International & Public Affairs (SIPA); National Bureau of Economic Research (NBER)

Date Written: May 2005

Abstract

The paper argues that global financial factors played an important role in the capital-inflow episode in Emerging Market economies (EMs), during the early part of the 1990s, and clearly in the Sudden Stop (of capital inflows) crises that took place after the 1998 Russian crisis. Moreover, the paper shows that recovery after crises that exhibit large output loss (more than 5 percent of GDP from peak to trough) occurs in a Phoenix-like fashion: little credit or investment is required. These results strongly suggest that: (1) deep financial crises can be prevented or at least largely alleviated and (2) global institutions and arrangements should be high on the policy agenda. The paper then discusses an Emerging Market Fund (EMF) charged with the task of lowering the incidence of contagion in EM bond prices. In addition, the paper analyzes domestic policies and concludes that they are critical and important in making EMs less vulnerable to shocks but are unlikely to succeed in fully shielding these economies from global financial shocks if not supported by arrangements like the EMF. Finally, two sections of the paper are devoted to discussing some current issues regarding applicable theory and econometrics.

Suggested Citation

Calvo, Guillermo A., Crises in Emerging Market Economies: A Global Perspective (May 2005). NBER Working Paper No. w11305. Available at SSRN: https://ssrn.com/abstract=714076

Guillermo A. Calvo (Contact Author)

Columbia University - School of International & Public Affairs (SIPA) ( email )

420 West 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
82
rank
293,974
Abstract Views
1,230
PlumX Metrics