The Resilience of Emerging Economies During the Great Recession: Lessons Learnt from Recent Data

The Resilience of Emerging Economies During the Great Recession: Lessons Learnt from Recent Data

Eleonora Cutrini (University of Macerata, Italy) and Giorgio Galeazzi (University of Macerata, Italy)
DOI: 10.4018/978-1-4666-9484-2.ch014
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This chapter focuses on the decoupling hypothesis between emerging countries and the advanced world. On the basis of quarterly seasonally adjusted data over the period 1995q1–2014q1 we present some evidence in favor of a decreasing vulnerability of emerging market economies to global economic and financial development, particularly convincing for Asian countries. Results confirm a common finding in the related literature: The acute phase of the financial crisis triggered by the US mortgage crisis corresponds to a period of substantial increase in business cycle synchronization, arguably determined by the synchronized trade collapse and foreign credit retrenchment, although in the aftermath of the global financial crisis, all the different groups of emerging economies started to decouple again from the United States, and also relative to the Eurozone and to Japan. Therefore, extending the time span to recent data allows us to envisage the recoupling phase with respect to the United States' business cycle as a temporary halt over a long-run decoupling initiated a decade ago.
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Background: An Overview Of The Changing World Economic Order

In the last 30 years the global economic order has changed markedly, largely because emerging economies achieved sustained high rates of growth of GDP whereas advanced economies (AEs), although they were reasonably dynamic and stable, underwent a slowdown in growth rates of GDP.

Key Terms in this Chapter

Concordance Measure: A statistics based on the comparison between the signs of two numerical values.

Recoupling: The opposite of cyclical decoupling, that is high business cycle synchronization.

Cyclical Decoupling: Independence between emerging economies and advanced economies for business cycle, so that the former are insulated from a slowdown originated in the latter.

Trend Decoupling: The hypothesis according to which emerging economies no longer depend on the advanced economies for growth.

Financial Contagion: The spread of a financial crisis from one country to others, a process usually observed through co-movements in stock prices, sovereign spreads, exchange rates, and international capital flows.

Output Gap: The difference between real effective GDP and trend GDP

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