GLOBAL FINANCIAL SHOCKS AND THEIR ECONOMIC IMPACT ON EMERGING MARKET ECONOMIES

The world has experienced episodes of global financial stress every 2.5 years on average over the past two decades, with repercussions on a global scale. Over the same period, emerging economies have improved their macroeconomic fundamentals while becoming increasingly integrated with the world. Against this backdrop, are these economies more or less vulnerable to large global financial shocks? What roles have macroeconomic fundamentals and financial integration played in amplifying or buffering the impact of these shocks? This paper addresses these questions by examining the output cost associated with these events in 40 emerging and nine "small" advanced economies during the period 1990-2010.