IMF Working Papers
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International Monetary Fund. Research Dept.
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This paper analyzes transmission of the great recession from advanced to emerging economies. The widespread impact of the global financial crisis of 2008–09 has spurred researchers to examine how the associated recession was transmitted from advanced to emerging economies. Recent IMF studies have found that precrisis vulnerabilities such as large current account deficits, rapid credit growth, and high levels of short-term debt were strongly associated with the magnitude of spillovers. Trade, bank lending, and financial markets served as key transmission channels.

Abstract

This paper analyzes transmission of the great recession from advanced to emerging economies. The widespread impact of the global financial crisis of 2008–09 has spurred researchers to examine how the associated recession was transmitted from advanced to emerging economies. Recent IMF studies have found that precrisis vulnerabilities such as large current account deficits, rapid credit growth, and high levels of short-term debt were strongly associated with the magnitude of spillovers. Trade, bank lending, and financial markets served as key transmission channels.

IMF Working Papers

No. 10/82

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Credit Conditions and Recoveries from Recessions Associated with Financial Crises

Kannan, Prakash

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Inflation Expectations and Monetary Policy in India: An Empirical Exploration

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Monetary Policy Committees, Learning, and Communication

Weber, Anke

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The Embodiment of Intangible Investment Goods: A Q-Theory Approach

Belhocine, Nazim

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The GCC Banking Sector: Topography and Analysis

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No. 10/88

Foreign Participation in Emerging Markets’ Local Currency Bond Markets

Peiris, Shanaka J.

No. 10/89

Russia’s Output Collapse and Recovery: Evidence from the Post-Soviet Transition

Kvintradze, Eteri

No. 10/90

Regional Financial Integration in the GCC

Espinoza, Raphael A.; Prasad, Ananthakrishnan; Williams, Oral

No. 10/91

Transparency and Monetary Policy with Imperfect Common Knowledge

Roca, Mauro

No. 10/92

Beyond the Crisis: Revisiting Emerging Europe’s Growth Model

Atoyan, Ruben

No. 10/93

Determinants of China’s Private Consumption: An International Perspective

Guo, Kai; N’Diaye, Papa M’B. P.

No. 10/94

Boom-Bust Cycle, Asymmetrical Fiscal Response and the Dutch Disease

Arezki, Rabah; Ismail, Kareem

No. 10/95

Bank Efficiency Amid Foreign Entry: Evidence from the Central American Region

Wezel, Torsten

No. 10/96

Growth Convergence and Spillovers among Indian States: What Matters? What Does Not?

Kalra, Sanjay; Sodsriwiboon, Piyaporn

No. 10/97

Absorption Boom and Fiscal Stance: What Lies Ahead in Eastern Europe?

Rahman, Jesmin

No. 10/98

Regulatory Capital Charges for Too-Connected-to-Fail Institutions: A Practical Proposal

Chan-Lau, Jorge A.

No. 10/99

Collateral, Netting and Systemic Risk in the OTC Derivatives Market

Singh, Manmohan

No. 10/100

Quantitative Properties of Sovereign Default Models: Solution Methods Matter

Hatchondo, Juan Carlos; Martinez, Leonardo; Sapriza, Horacio

No. 10/101

Development Accounting and the Rise of TFP

Arezki, Rabah; Cherif, Reda

No. 10/102

The Global Credit Crunch and Foreign Banks’ Lending to Emerging Markets: Why Did Latin America Fare Better?

Kamil, Herman; Rai, Kulwant

No. 10/103

The Structural Manifestation of the “Dutch Disease”: The Case of Oil-Exporting Countries

Ismail, Kareem

No. 10/104

House Price Determinants in Selected Countries of the Former Soviet Union

Stepanyan, Vahram; Poghosyan, Tigran; Bibolov, Aidyn

No. 10/105

Cross-Border Financial Surveillance: A Network Perspective

Espinosa-Vega, Marco; Sole, Juan

No. 10/106

Implementing Official Dollarization

Jácome, Luis Ignacio; Lönnberg, Åke

No. 10/107

Balance Sheet Network Analysis of Too-Connected-to-Fail Risk in Global and Domestic Banking Systems

Chan-Lau, Jorge A.

No. 10/108

The Global Financial Crisis and its Impact on the Chilean Banking System

Chan-Lau, Jorge A.

No. 10/109

Power Laws in Firm Size and Openness to Trade: Measurement and Implications

di Giovanni, Julian; Levchenko, Andrei A.; Ranciere, Romain

No. 10/110

Public Investment as a Fiscal Stimulus: Evidence from Japan’s Regional Spending During the 1990s

Bruckner, Markus; Tuladhar, Anita

No. 10/111

Fiscal Policy and Macroeconomic Stability: Automatic Stabilizers Work, Always and Everywhere

Debrun, Xavier; Kapoor, Radhicka

No. 10/112

Equity and Fiscal Policy: The Income Distribution Effects of Taxation and Social Spending in Central America

Cubero, Rodrigo; Hollar, Ivanna Vladkova

No. 10/113

Important Elements for Inflation Targeting for Emerging Economies

Freedman, Charles; Ötker, Inci

No. 10/114

Managing the Exit: Lessons from Japan’s Reversal of Unconventional Monetary Policy

Syed, Murtaza H.; Yamaoka, Hiromi

No. 10/115

Short-Versus Long-Term Credit and Economic Performance: Evidence from the WAEMU

Kpodar, Kangni; Gbenyo, Kodzo

No. 10/116

Oil Windfalls in Ghana: A DSGE Approach

Dagher, Jihad; Gottschalk, Jan; Portillo, Rafael

No. 10/117

Determinants of Investment Grade Status in Emerging Markets

Jaramillo, Laura

No. 10/118

The Linkage between the Oil and Non-oil Sectors--A Panel VAR Approach

Klein, Nir

No. 10/119

ASEAN: A Chronicle of Shifting Trade Exposure and Regional Integration

Kalra, Sanjay

No. 10/120

Sovereign Spreads: Global Risk Aversion, Contagion or Fundamentals?

Caceres, Carlos; Guzzo, Vincenzo; Segoviano Basurto, Miguel A.

No. 10/121

Fiscal Policy and the Current Account

Abbas, S. M. Ali; Bouhga-Hagbe, Jacques; Fatas, Antonio J.; Mauro, Paolo; Velloso, Ricardo

No. 10/122

Recoveries in the Middle East, North Africa, and Pakistan: Have Macroeconomic Policies Been Effective?

Hakura, Dalia; Grigoli, Francesco

No. 10/123

Fiscal Stimulus and Credibility in Emerging Countries

Kandil, Magda E.; Morsy, Hanan

No. 10/124

International Transmission of Bank and Corporate Distress Chen, Qianying; Gray, Dale F.; N’Diaye, Papa M’B.P.; Oura, Hiroko; Tamirisa, Natalia T.

No. 10/125

Dynamic Loan Loss Provisions in Uruguay: Properties, Shock Absorption Capacity and Simulations Using Alternative Formulas

Wezel, Torsten

No. 10/126

Mining Taxation: An Application to Mali

Thomas, Saji

No. 10/127

Potential Growth of Australia and New Zealand in the Aftermath of the Global Crisis

Sun, Yan

No. 10/128

The Potential Contribution of Fiscal Policy to Rebalancing and Growth in New Zealand

Schule, Werner

No. 10/129

What Explains the Rise in Food Price Volatility?

Roache, Shaun K.

No. 10/130

The Credit Boom in the EU New Member States: Bad Luck or Bad Policies?

Bakker, Bas Berend; Gulde, Anne Marie

No. 10/131

U.S. Bank Behavior in the Wake of the 2007-2009 Financial Crisis

Barajas, Adolfo; Chami, Ralph; Cosimano, Thomas F.; Hakura,

Dalia

No. 10/132

FDI Flows to Low-Income Countries: Global Drivers and Growth Implications

Dabla-Norris, Era; Honda, Jiro; Lahréche-Révil, Amina; Verdier, Geneviéve

No. 10/133

How Expensive is Norway? New International Relative Price Measures

Tulin, Volodymyr; Krajnyák, Kornélia

No. 10/134

On the Optimal Adherence to Money Targets in a New-Keynesian Framework: An Application to Low-Income Countries

Berg, Andrew; Portillo, Rafael; Unsal, D. Filiz

No. 10/135

Commodity Prices and Inflation in the Middle East, North Africa, and Central Asia

Crowley, Joseph

No. 10/136

Banking Efficiency and Financial Development in Sub-Saharan Africa

Kablan, Sandrine

No. 10/137

In Search of Lost Revenue: Why Restoring Fiscal Soundness after a Crisis Is Harder than It Looks

Miyazaki, Masato

No. 10/138

Tax Revenue Downturns: Anatomy and Links to Imports

Li, Kun; Lopez Murphy, Pablo

No. 10/139

Current Account Imbalances in the Southern Euro Area

Jaumotte, Florence; Sodsriwiboon, Piyaporn

No. 10/140

Beyond Aid: How Much Should African Countries Pay to Borrow?

Gueye, Cheikh A.; Sy, Amadou N. R.

No. 10/141

Fire Sales and the Financial Accelerator

Choi, Woon Gyu; Cook, David

No. 10/142

Demand Spillovers and the Collapse of Trade in the Global Recession

Bems, Rudolfs; Johnson, Robert C.; Yi, Kei-Mu

No. 10/143

Treasury Single Account: Concept, Design, and Implementation Issues

Pattanayak, Sailendra; Fainboim Yaker, Israel

No. 10/144

Inflation Dynamics in Yemen: An Empirical Analysis

Almounsor, Abdullah

No. 10/145

Can You Map Global Financial Stability?

Dattels, Peter; McCaughrin, Rebecca; Miyajima, Ken; Puig, Jaume

No. 10/146

Resolution of Banking Crises: The Good, the Bad, and the

Ugly

Laeven, Luc; Valencia, Fabian

No. 10/147

Subnational Health Spending and Soft Budget Constraints in OECD Countries

Crivelli, Ernesto; Leive, Adam; Stratmann, Thomas No. 10/148

Balance Sheet Vulnerabilities of Mauritius During a Decade of Shocks

Imam, Patrick A.; Koehler, Rainer

No. 10/149

Vietnam: Bayesian Estimation of Output Gap

Maliszewski, Wojciech

No. 10/150

Procyclicality in Central Bank Reserve Management: Evidence from the Crisis

Pihlman, Jukka; van der Hoorn, Han

No. 10/151

Currency Hedging for International Portfolios

Schmittmann, Jochen M.

No. 10/152

Monetary Policy Analysis and Forecasting in the Group of Twenty: A Panel Unobserved Components Approach

Vitek, Francis

No. 10/153

The Fundamental Determinants of Credit Default Risk for European Large Complex Financial Institutions

Ötker, Inci; Podpiera, Jiri

No. 10/154

The Impact of Capital and Foreign Exchange Flows on the Competitiveness of Developing Countries

Bakardzhieva, Damyana; Ben Naceur, Sami; Kamar, Bassem

No. 10/155

Automatic Stabilizers and the Size of Government: Correcting a Common Misunderstanding

Cottarelli, Carlo; Fedelino, Annalisa

No. 10/156

Of Runes and Sagas: Perspectives on Liquidity Stress Testing Using an Iceland Example

Ong, Li L.; Cihák, Martin

No. 10/157

Should African Monetary Unions Be Expanded? An Empirical Investigation of the Scope for Monetary Integration in Sub-Saharan Africa

Debrun, Xavier; Masson, Paul R.; Pattillo, Catherine A.

No. 10/158

External Finance, Sudden Stops, and Financial Crisis: What is Different This Time?

Gulcin Ozkan, F.; Unsal, D. Filiz

No. 10/159

Inflation and Conflict in Iraq: The Economics of Shortages Revisited

Grigorian, David A.; Kock, Udo

No. 10/160

The Macroeconomics of Medium-Term Aid Scaling-Up Scenarios

Berg, Andrew; Gottschalk, Jan; Portillo, Rafael; Zanna, Luis-Felipe

No. 10/161

World Food Prices and Monetary Policy

Catáo, Luis; Chang, Roberto

No. 10/162

Exchange Rate Assessment for Sub-Saharan Economies

Aydin, Burcu

No. 10/163

Budget Consolidation: Short-Term Pain and Long-Term Gain

Clinton, Kevin; Kumhof, Michael; Laxton, Douglas; Mursula, Susanna

No. 10/164

Financial Innovation, the Discovery of Risk, and the U.S. Credit Crisis

Boz, Emine; Mendoza, Enrique G.

No. 10/165

China’s Economic Growth: International Spillovers

Arora, Vivek B.; Vamvakidis, Athanasios

No. 10/166

How Do International Financial Flows to Developing Countries Respond to Natural Disasters?

David, Antonio

No. 10/167

Local Housing Market Cycle and Loss Given Default: Evidence from Sub-Prime Residential Mortgages

Zhang, Yanan; Ji, Lu; Liu, Fei

No. 10/168

Does Procyclical Fiscal Policy Reinforce Incentives to Dollarize Sovereign Debt?

Guscina, Anastasia; Ilyina, Anna; Kamil, Herman

No. 10/169

Peru: Drivers of De-dollarization

Garcia-Escribano, Mercedes

No. 10/170

The Dark Side of Bank Wholesale Funding

Huang, Rocco; Ratnovski, Lev

No. 10/171

The Cross-Country Incidence of the Global Crisis

Lane, Philip R.; Milesi-Ferretti, Gian Maria

No. 10/172

The (Sizable) Role of Rehypothecation in the Shadow Banking System

Singh, Manmohan; Aitken, James

No. 10/173

Democracy and Reforms: Evidence from a New Dataset

Giuliano, Paola; Mishra, Prachi; Spilimbergo, Antonio

IMF Working Papers and other IMF publications can be downloaded in full-text format from the Research at the IMF website: http://www.imf.org/research.

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IMF Research Bulletin, September 2010
Author:
International Monetary Fund. Research Dept.