Title: Developing Countries in the Face of the Global Economic Crisis: Dependence and Sources of Vulnerability
Abstract: The 2007-2008 crisis started in the advanced economies but spread to the developing world as well. However, the way the developing countries have been affected by the crisis varied considerably. This study seeks to explore how the global economic crisis caused an output collapse in developing economies and to find out why some were more deeply affected by the crisis compared to the others through a cross-national analysis. It was presumed that the more integrated an economy to the world economy through trade and foreign capital, the more its output suffered in 2009. Yet, it was also presumed that some domestic weaknesses in the trade and finance areas would increase the impact of the crisis on developing countries. Therefore, this study looks at several economic factors that would transmit the crisis into the middle-income developing countries in order to determine the sources of vulnerability in developing countries to this major external shock. The results of the analysis present some evidence that export dependence, low reserves, high short-term debt, and relatively high GDP per capita in 2007 are associated with higher drop in GDP growth in 2009 compared to the boom years of the 2003-2007. The negative impact of dependence on foreign capital is not verified; neither IMF’s negative impact could be verified. It seems like, unless they had high financial risk because of low reserves or high short-term debt, middle income developing economies were mainly shaken through the trade channel during the crisis.
Publication Year: 2013
Publication Date: 2013-01-01
Language: en
Type: article
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