Original source: SimoleonSense.com .
Summary (via Voxeu)
The causes and consequences of the current global crisis have been compared with the Great Depression as well as crises in emerging markets. This column argues that the main difference between emerging market crises and the global crisis is that the former relied on an export recovery while the recent recovery has been fuelled by far less sustainable government expenditure.
Introduction (via Voxeu)
Examination of systemic financial crises in emerging market economies reveals a surprising phenomenon. As figures show, even though the proximate cause of these crises is a systemic “sudden stop” (of capital inflows), output recovery occurs without an equivalent increase in investment or domestic credit (IMF 2010).
This “Phoenix Miracle”, as defined in Calvo et al. (2006), also holds for the US recovery following the Great Depression – except that the latter exhibits larger and more protracted output loss than the average emerging market in Calvo et al. (2006) sample.
Additional Exerpt (via Voxeu)
Recovery of trade credit required international financial cooperation and, in some instances, selling domestic assets at fire-sale prices to multinational corporations with access to the credit market. This had the virtue of restoring the credit channel and increasing the chances of growth sustainability.Will government expenditure have similar healing effect on financial intermediation? We doubt it, but only future can tell
- Methods To Identify Systemic Financial Risks
- Nouriel Roubini- A Phantom Economic Recovery
- Robert Shiller Don’t Bet the Farm on the Housing Recovery
- The Aftermath of Financial Crises: Ken Rogoff & Carmen Reinhart
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