Mr. Chris Papageorgiou, Mr. Andrew Berg, Ms. Catherine A Pattillo, and Mr. Nikola Spatafora
This paper investigates the medium- and long-term growth effects of the global financial crises on Low-Income Countries (LICs). Using several methodological approaches, including impulse response function analysis, growth spells techniques and panel regressions, we show that external demand (ED) shocks are not historically associated with sharp declines in output growth. Given existing evidence that LICs were primarily impacted by such a shock in the global financial crisis, our analysis provides some optimism on the chances that LICs will avoid a protracted period of slow growth. However, we also show that there seem to be persistent output losses associated with ED shocks in the medium-run. In terms of policy implications, our analysis provides evidence that countries with lower deficits, lower debt, more flexible exchange rate regimes, and a higher stock of international reserves are more likely to dampen the effects of an ED shock on growth.
This paper presents a methodology to estimate equilibrium real exchange rates (ERER) for Sub-Saharan African (SSA) countries using both single-country and panel estimation techniques. The limited data set hinders single-country estimation for most countries in the sample, but panel estimates are statistically and economically significant, and generally robust to different estimation techniques. The results replicate well the historical experience for a number of countries in the sample. Panel techniques can also be used to derive out of sample estimates for countries with a more limited data set.