The Initial Impact of the Crisis on Emerging Market Countries

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This paper is also available free online full text in SSRN (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1629865) and on the Brookings web site (http://www.brookings.edu/economics/bpea/past-editions.aspx). Not sure if this is peer reviewed or not, or if it's more like a working paper.
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Author(s)
Blanchard, Olivier Jean
•
Das, Mitali
•
Faruqee, Hamid
Date Issued
June 2010
Journal
Brookings Papers on Economic Activity
Publisher
Brookings Institution Press
Citation
Blanchard, Oliver J., Mitali Das and Hamid Faruqee. "The Initial Impact of the Crisis on Emerging Market Countries." Brookings Papers on Economic Activity, Spring 2010, pp. 263-307. http://muse.jhu.edu/journals/brookings_papers_on_economic_activity/v2010/2010.1.blanchard.pdf
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Author's final manuscript
Abstract
To understand the diverse impact of the crisis across emerging market countries, we explore the role of two shocks—the collapse in trade and the sharp decline in financial flows—in the transmission of the crisis from the advanced economies. We first develop a simple open economy model, which allows for imperfect capital mobility and potentially contractionary effects of currency depreciation due to foreign debt exposure. We then look at the cross-country evidence. The data suggest a strong role for both trade and financial shocks. Perhaps surprisingly, the data give little econometric support for a central role of either reserves or exchange rate regimes. We end by presenting case studies for Latvia, Russia, and Chile.
MIT Department
Massachusetts Institute of Technology. Department of Economics
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DOI of Published Version
https://doi.org/10.1353/eca.2010.0005
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