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Spillovers to Low-Income Countries: Importance of Systemic Emerging Markets
Author:
Ms. Era Dabla-Norris
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,
Mr. Raphael A Espinoza
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, and
Mrs. Sarwat Jahan
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Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 049
Language:
English
Publication Date:
01 Feb 2012
DOI:
https://doi.org/10.5089/9781463937102.001
ISBN:
9781463937102
ISSN:
1018-5941
Pages:
27
Keywords:
WP; EM leader; LIC growth prospect; LICS in SSA; MNA region; LICS in Asia; Growth Spillovers; Low-Income Countries; Economic Integration; Decoupling; Vector Autoregression; Panel Estimate; commodity exporter; Spillovers; Exports; Foreign direct investment; Emerging and frontier financial markets; Commodity price fluctuations; Global; Asia and Pacific; Africa
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper documents the expanding economic linkages between low-income countries (LICs) and a narrow group of "Emerging Market leaders" that have become major players in regional and global trade and financial flows. VAR models show that these linkages have increased the share of growth volatility that can be attributed to foreign shocks in LICs. Dynamic panel models further analyze the impact of LIC trade orientation and production structure on the sensitivity to foreign shocks. The empirical results demonstrate that the elasticity of growth to trading partners' growth is high for LICs in Asia, Latin America and the Caribbean, and Europe and Central Asia. However, for commodity-exporting LICs in Sub-Saharan Africa and the Middle East, terms of trade shocks and demand from the emerging market leaders are the main channels of transmission of foreign shocks.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund