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Risk Factors in International Financial Crises: Early Lessons from the 2008-2009 Turmoil
Working paper by Dullien, Sebastian/ HTW, 2010
Berlin Working Papers on Money, Finance, Trade and Development
In cooperation with
Working Paper No. 01/2010
Risk factors in international financial crises: early
lessons from the 2008-2009 turmoil
Risk factors in international financial crises: early lessons
from the 2008-2009 turmoil
By Sebastian Dullien
This paper analyses the global transmission of the recent economic and financial
crisis as a function of macroeconomic factors such as per capita gross domestic
product, current-account positions prior to the crisis, exchange-rate regimes,
inflation prior to the crisis and financial openness. It finds that large current-account
imbalances (both surpluses and deficits) were a risk factor in the current global
economic turmoil. It also finds that countries that use currency boards have suffered
much more from the crisis than countries with other exchange-rate regimes.
Financial openness appears to have increased the risk of experiencing a deep
recession, while higher inflation prior to the crisis seems to have mitigated its
Keywords: crisis of 2008/9, exchange rate regimes, emerging markets, developing
JEL classifications: E63, F31, F32
There is a growing body of literature on the various impacts of the economic and financial
crisis on countries around the world. Much has been written on its impacts on world trade, on
commodity producing countries, on countries which have close trade linkages with the United
States, and on countries which rely heavily on remittance flows from developed countries.2
This paper aims to shed light on the spreading financial turmoil from a different angle: it
attempts to examine the international transmission of the subprime crisis in the United States
to determine which macroeconomic characteristics, beyond sectoral specialization and trade
specialization, make countries more vulnerable to the contagion effects of a global financial
and economic crisis. It looks at economic aspects which can be influenced by policymakers,
such as the exchange-rate regime, inflation, the current-account balance and capital-account
openness. In so doing, it adds to the debate on the choice of exchange-rate regimes, on
macroeconomic management, including under- or overvaluation of a currency, and on capital
1 HTW Berlin – University of Applied Sciences, E-Mail: firstname.lastname@example.org
2 For a recent overview of a number of these issues, see Ocampo et al., 2010.
The paper is structured as follows. After a brief discussion on measuring the impact of the
crisis on individual countries, it provides a quantitative description of the most important
stylized facts of the global spread of the crisis, building on economic data for 181 countries
covered by the World Economic Outlook of the International Monetary Fund (IMF).3 It then
uses econometric techniques to determine which macroeconomic features helped some
countries to be more resilient to the financial and economic crisis than others. This section
also looks at the factors that might have played a role in determining whether a country
should turn to the IMF to cover financing needs in the recent crisis. The final section seeks to
offer tentative explanations for the empirical observations. Other contributions in this book
dwell on the wider implications of the findings, though these will also require further research
as more data become available.
1. Empirical analysis of the crisis
For determining the negative impact of the crisis, the following three criteria have been used
throughout the paper:
1. The change of trend in the GDP growth rate from the average of the years prior to the
crisis (2003–2007) to the average of the crisis years 2008–2009. This measure has
been chosen because the crisis hit different countries at different points in time. World
trade was already severely affected in the last quarter of 2008, and some countries
already had trouble financing their foreign deficit that year. However, due to the base
effect, this drop is partly reflected in the annual GDP growth rate in 2008 and partly in
2009. Looking only at the growth rate of one of these two years would have distorted
2. The simple average growth rate of GDP for the years 2008 and 2009. Again, looking
at both years together gives a better picture than looking only at 2009 when most of
the decline occurred.
3. The fact that a country had to turn to the IMF for borrowing. Especially after the huge
wave of criticism of the IMF’s policies during the East Asian crisis of 1997–1998,
borrowing from the IMF has come to be seen not only as a national humiliation, but
also, increasingly, as an economic evil best avoided. Thus, being forced to accept IMF
lending can be viewed as a sign that a country has been severely affected by a crisis.
3 For this study, Zimbabwe has been excluded from the data set as it is an outlier for a number of the data points
considered, and the country’s recession is by most accounts largely independent of the global crisis.
Of course, there are other important negative economic and social consequences of the crisis,
such as rising unemployment and poverty, and increasing government debt. However, limited
availability of up-to-date data on these aspects constrains the analysis here. Unemployment
data are often not comparable between countries, and recording of unemployment figures,
especially for developing countries and emerging-market economies, are often inexact, as
employment in the informal sector is not always well covered. Moreover, the impact of the
crisis on the labour market may exhibit different time lags in different countries. In some
countries, retrenchment of workers is an easy and quick process, while in others it takes much
longer due to the legal regime or conventions. In addition, some countries have passed
measures temporarily stabilizing labour markets. Thus data currently available on labour
market performance are not an adequate indicator for measuring the impact of the crisis at this
particular point in time; its full impact can only be evaluated later.
Reporting of government debt and government budget deficits outside the OECD countries is
also not very exact and up-to-date, and the IMF’s World Economic Outlook therefore provides
such data for only a limited number of countries. Similarly, due to the lack of reliable, up-to-
date statistics for the incidence of poverty across countries, it is difficult to assess to what
extent poverty has increased as a result of the crisis. While there have been a number of
estimates (i.e. Chen and Ravallion, 2009), these are necessarily only very rough. These
indicators have therefore been omitted from this paper; instead, the paper focuses on the drop
in GDP and the extent of IMF involvement.
The analysis in this paper is based on data assembled from various sources. Data on GDP,
inflation and current accounts have been taken from the IMF’s World Economic Outlook
database (January 2010). Data on capital-account openness have been derived from Chinn and
Ito (2008). And data on exchange-rate regimes have been taken from the IMF’s classification
of exchange-rate regimes (IMF, 2009) and modified to include an additional group of
countries in the European Monetary Union (EMU).4 Altogether, the sample comprises 179
1.1 Descriptive statistics
Before we turn to a rigorous econometric analysis, it is useful to take a brief look at the data.
At the beginning of the crisis, it was often argued by the IMF and financial sector analysts
4 The IMF classifies EMU countries as “independently floating”. While this might be an appropriate description
of EMU as a whole, it is misleading when looking at the performance of individual member countries such as
Greece, as that country has a fixed exchange rate with its main trading partners.
that the emerging-market economies and developing countries might be decoupled from
developed economies, particularly the United States, and may therefore be able to cope with
the turmoil more effectively. While this hope proved to be illusory, at least some emerging-
market economies have performed much better than other parts of the world. Asian countries,
in particular, have managed to recover very quickly and briskly from the crisis, with parts of
Latin America following. In contrast, economic data for most of the members of the
Commonwealth of Independent States (CIS) and the new member States of the European
Union (EU) have shown few real improvements. Also the United States and the Western
European industrialized economies have proved to be laggards, with vulnerable economic
recovery (IMF, 2010).
Beyond these regional features, however, the impact of the crisis has clearly varied with the
state of development of the economies in question.5 On examining the different categories of
countries, namely low-income countries (GDP per capita below $975), lower middle-income
countries (GDP per capita between $976 and $3,855), upper middle-income countries (GDP
between $3,858 and $11,905) and high-income countries, we found fairly large variations in
the fall in the growth between the years 2003–2007 and 2008–2009: high-income countries
experienced a drop in the growth rate of 5.2 percentage points,6 upper middle- income
countries saw an almost equally large drop of 4.9 percentage points, while lower middle-
income countries saw growth decline by 2.7 percentage points and lower income countries by
only 1.2 percentage points. The group of high-income countries was the only category which
recorded an average annual negative growth rate for the years 2008 and 2009 of minus 0.7
per cent. This group therefore was solely responsible for the contraction of world GDP in
The crisis has also seen a resurgence of borrowing from the IMF. After years of not being
able to find borrowers, the IMF has started to lend again, supported by a pledge by its
shareholders to provide more funding as part of internationally coordinated crisis-fighting
efforts. Net disbursements by the Fund have been higher than at any time since the mid-
1980s, with net payouts totalling more than 20 billion in Special Drawing Rights (SDRs)
(about US$ 30 billion) in 2009 (figure 1). Also, the number of countries borrowing from the
IMF has risen sharply: out of 179 countries in our sample, 53 received IMF funding in 2009 –
a share of almost 30 per cent.
5 For descriptive statistics on the impact of the crisis on different economies, see the table in the annex.
6 All data for each country group refer to simple, unweighted averages for the country group in question.
Figure 1: Net IMF loan disbursements
Source: author's calculations, based on data from IMF website
The impact of the crisis has clearly varied with the size of the external imbalances of
individual countries. Dividing the sample into four country groups according to their current-
account positions prior to the crisis (those with a high current-account surplus of more than 5
per cent of GDP, those with a current-account surpluses of less than 5 per cent of GDP, those
with a current-account deficit of more than 5 per cent of GDP and those with a current-
account deficit of less than 5 per cent of GDP), it can be observed that countries with large-
current account imbalances – surpluses or deficits – have been hit harder than those with
moderate imbalances. The group with very high surpluses experienced a drop in the growth
trend by 4.2 percentage points, followed by an only slightly smaller drop in the growth trend
of 3.9 percentage points for the group with very high deficits. In contrast, countries with
moderate deficits and those with moderate surpluses experienced a decline of only 2.2
percentage points and 3.1 percentage points respectively (figure 2).
Figure 2: Change in GDP growth between 2003–2007 and 2008–2009 by current-
account position of countries (Percentage points)
The exchange-rate regime also seems to have an impact on the vulnerability of a country to
the contagion effects of a crisis. After the Asian crisis in the 1990s, the notion of the stable
corner solutions (“corner solution paradigm”) came into vogue. According to this proposition,
in the long run only two currency regimes would be stable: the completely fixed or the
completely flexible exchange rate.7 Proponents of this hypothesis understood by “completely
fixed” any regime which was then seen as providing an irrevocably fixed exchange rate,
thereby providing no room for speculation. In addition to dollarization, currency boards and
monetary union were also seen as belonging to this category of exchange-rate regimes,
7 Early proponents include Eichengreen, 1994, and Obstfeld and Rogoff, 1995.
because, in principle, under these regimes the authorities have the necessary means in the
form of reserves to prevent any crack in the exchange-rate peg.8
In order to get an idea of the initial impact of the exchange-rate regime on the vulnerability of
countries, the sample was divided into nine groups, using the IMF’s classification of
exchange-rate regimes plus a separate group for countries in the EMU.9 Again, the results are
quite revealing. The (small) group of dollarized economies, including countries such as
Ecuador, Montenegro and Panama,10 managed the crisis relatively well: their GDP growth fell
by only 0.6 percentage points, and growth continued at an average rate of 3.7 per cent in
2008–2009 – above average in the overall sample. None of these countries had to seek IMF
support. However, before taking this result as a strong endorsement of dollarization, it must
be borne in mind that the countries which lacked a legal tender of their own had been growing
less rapidly in the years prior to the crisis than other countries of similar income levels (see
annex table). In addition, abandoning the national currency deprives policy makers of the
possibility of domestic financing of investment, as noted in Dullien (2009). Countries having
the other types of exchange-rate regimes originally considered as “completely fixed” have
performed comparatively badly during the crisis. The group of currency board countries,
including Bulgaria and Estonia, but also some smaller Caribbean countries, have been the
worst affected. GDP growth there declined, on average, by a whopping 6 percentage points.
In addition, these countries experienced a contraction in average annual GDP of 1 per cent in
2008 and 2009.
Interestingly, the exchange-rate regimes that, on average, produced the best outcome during
the crisis are those in the “middle ground” which were once seen as not sustainable. Countries
which had exchange-rate regimes classified as “conventional fixed peg” (except currency
boards, monetary union and dollarization), “pegged exchange rate within horizontal bands”,
“crawling pegs” or “crawling bands” saw their GDP growth rates decline by an average of
only 3 percentage points, and they achieved an average annual GDP growth rate of 3 per cent
in 2008 and 2009, while those with exchange-rate regimes closer to the “corners” saw their
8 Of course, the Argentine crisis of 2001-2002, which resulted in its exit from a currency board, showed that
such a regime is certainly not an “irrevocably fixed” exchange-rate regime.
9 The IMF classifies EMU countries as “independently floating”. While this might be an appropriate description
of EMU as a whole, it is certainly misleading when looking at the performance of a single member country such
as Greece as that country has a fixed exchange rate with its main trading partners.
10 Countries are counted as “dollarized” if they have adopted a foreign currency. Thus, Montenegro is considered
as having a “dollarized” economy even though it uses the euro.
GDP growth rate decline by 3.8 percentage points and recorded an average annual GDP
growth rate of only 1.2 per cent.
Table 1: Impact of the crisis by different exchange-rate regimes
1.2 Econometric estimates
Descriptive statistics like those above can be misleading. For example, currency board
countries as a group also usually have high current-account deficits. The question is therefore
whether the factors analysed above have a direct influence on their own, or only an indirect
influence. This can only be answered by means of rigorous econometric testing. Thus, as a
first step, a regression was run with the change in GDP growth between 2003–2007 and
2008–2009 as the dependent variable, and the current-account balance prior to the crisis
(2007), the inflation rate prior to the crisis (2007), GDP per capita, the variable for capital-
account openness, a dummy for an IMF programme in 2009 and dummies for the different
types of exchange-rate regimes as independent variables. In a general-to-specific-approach,
Change in GDP
Dollarized economies -0.6 3.7 4.3
Currency board arrangements -6.0 -1.0 5.1
Free float -4.2 -0.1 4.1
Managed float -3.2 3.0 6.2
European Monetary Union -4.3 -1.3 3.0
Others ("middle ground")* -3.0 3.0 5.9
* Other conventional fixed peg arrangements, pegged exchange rate within horizontal
bands, crawling peg, crawling band.
Source: Author’s calculations, based on the IMF’s World Economic Outlook Database
(accessed in January 2010) and IMF (2009)
variables that were not significant, at least at a 10 per cent level, were eliminated. In addition,
both the current-account balance and the absolute value of the current-account balance were
alternatively included in order to allow for the possibility that large surpluses also make a
country vulnerable. The final equation for the change in the growth trend during the crisis
reads as follows:
where is the percentage point change in the average annual growth rate between
2003–2007 and 2008–2009, is GDP per capita in current US$ 1,000, and
is the absolute value of the current account in 2007 as a per cent of
From this it can be observed that only per capita GDP levels and current-account imbalances
had a clearly negative influence on the way a country was affected by the crisis (both
coefficients are significant at the 5 per cent level), where the impact was measured as a
change in the trend growth rate. Countries with higher per capita incomes have been hit
significantly harder by the crisis than those with lower incomes. Interestingly, the current-
account balance as a per cent of GDP was insignificant in explaining the change in GDP
growth, while the absolute value of the current-account balance as a per cent of GDP turned
out to be highly significant. Hence, not only current-account deficits appear to have
contributed to the propagation of the crisis, but also current-account surpluses.
In a second step, a regression analysis was undertaken of the current-account balance prior to
the crisis (2007), the inflation rate prior to the crisis (2007), GDP growth rate prior to the
crisis (2003 to 2007), GDP per capita, the variable for capital-account openness, a dummy for
an IMF programme in 2009 and dummies for the different types of exchange-rate regimes as
possible factors influencing the average annual rate of GDP growth in 2008-2009. As before,
variables which turned out to be statistically insignificant were eliminated, and both the
current-account balance and the absolute value of the current-account balance were tested.
The resulting equation reads:
Where is the average annual growth rate of GDP in 2008 and 2009,
is the average annual growth rate of GDP during the period 2003–2007,
is the current account position as a per cent of GDP in the year 2007,
is the rate of inflation in 2007 and is a dummy for the country using a currency
All variables were significant at the 5 per cent level, except inflation and the GDP growth rate
for the period 2003–2007 which were significant at 10 per cent.
A few of the results are notable. First, again GDP per capita turned out to be a very strong
predictor of lower growth in the crisis years, even when controlling for growth prior to the
crisis. One reason might be that the crisis originated in some of the most developed countries.
Second, the current-account deficit, not the absolute value, seems to be a significant variable.
A larger deficit prior to the crisis led to lower growth during the crisis years. Third, countries
with a currency board in place had a significantly lower growth rate in 2008–2009 (by an
annual two percentage points on average), even after controlling for the effects of the huge
current-account deficits some of the currency board countries such as Lithuania and Estonia
were running prior to the crisis. Third, inflation prior to the crisis seems to have influenced
the impact of the crisis, but not in the way that would be predicted by standard theory. In
actual fact, a higher rate of inflation prior to the crisis was correlated with a higher growth
rate during the crisis (even when controlling for GDP growth prior to the crisis).
Another interesting feature seems to be the lack of any correlation between the depth of the
crisis in a country and its request for IMF support. This result would mean first that countries
seem to have sought IMF support regardless of the scale of their economic downturn, and
second, that the IMF programmes do not appear to have significantly influenced the growth
outcomes of those countries compared with other countries having similar characteristics.
In a third step, a probit approach was used to test which characteristics increased the
probability of a country seeking IMF support. Again, all variables were initially included and
subsequently eliminated. In the end, the probit model for the probability of an IMF
programme was estimated (table 2).
Table 2: Probit model: Probability of IMF intervention
Variable Coefficient Standard error
Constant -0.575 0.151 (***)
-0.392 0.118 (***)
*** significant, at 1 per cent
Only two variables are significant for explaining the need for an IMF programme: the current-
account balance and the GDP per capita. The larger the current-account deficit prior to the
crisis, the larger was the probability of a country seeking IMF assistance in response to the
crisis. In fact, looking at the descriptive statistics, it can be seen that only 2 out of the 53
countries which borrowed from the IMF in 2009 had a current-account surplus prior to the
crisis. In addition, the richer a country in per capita terms, the less likely it was to seek IMF
intervention. This is an interesting result, as IMF intervention was considered most likely for
emerging-market economies. During the crisis, however, the Fund has lent strongly also to
lower income countries. None of the exchange-rate regime dummies proved to be
11 However, some of the exchange-rate regime dummies showed a 100 per cent correlation with no IMF
programmes. For example, no dollarized country turned to the IMF in the latest crisis. However, interpreting this
fact in economic terms is not straightforward. While proponents of dollarization might claim that this shows the
greater stability of dollarized economies, it is just as plausible that dollarized economies lack the channels for
intervention through an IMF loan, or that the number of dollarized economies was too small (5 out of 179) to
enable a reliable conclusion to be drawn.
Finally, the group of worst performers during the crisis was selected and another probit
estimation run on the characteristics of this group. To this end, a threshold of an annual
contraction by more than 3 per cent for 2008–2009 was chosen (a total contraction of more
than 6 per cent), which produced 12 countries: Armenia, Botswana, Estonia, Hungary,
Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Seychelles and Ukraine. The probit
estimation for these countries yielded the results presented in table 3, with KOpen referring to
capital-account openness as measured by the Chinn/Ito index.
Table 3: Probit model: Probability of a deep recession
Variable Coefficient Standard error
Constant -2.671 -2.671 (***)
0.154 0.857 (*)
0.092 0.055 (*)
KOpen 0.262 0.122 (**)
*** significant at 1 per cent level
** significant at 5 per cent level
* significant at 10 per cent level
Thus again, having a higher GDP per capita generally increases the risk of experiencing a
severe recession. A large current-account deficit prior to the crisis is also an important risk
factor. Having a relatively open capital account seems to be another risk factor for suffering
severe consequences of a global financial and economic crisis. Our regression analysis
revealed yet another factor: experiencing very strong growth in the years 2003–2007 (i.e. just
prior to the crisis) also seemed to have increased the risk of the crisis plunging a country into
a deep recession. This finding hints that a boom prior to the crisis might have led to
imbalances, which made the economy in question more vulnerable (as it might have been part
of a boom-and-bust cycle). Finally, having a very open capital account, as measured by the
Chinn/Ito index, significantly increased the risk of experiencing a very deep recession as a
consequence of the United States subprime crisis.
1.3 Summing up the empirical evidence
Thus, the findings may be summarized as follows:
1. In terms of impact on GDP and GDP growth, the crisis appears to have affected high-
and upper middle-income countries more than poorer countries, even though there
may have been greater suffering in lower income countries, as a drop in GDP growth
might be more severe in an environment without social safety nets and widespread
poverty as a result of the crisis.
2. Large current-account imbalances – not only deficits – seem to be an important risk
factor for vulnerability to crisis transmission.
3. Currency boards seem to be an additional risk factor, in addition to the impact a
currency board might have on the external balance by increasing the current-account
4. An open capital account appears to exacerbate vulnerability.
5. Inflation, long seen as a prime concern for macroeconomic stability and an important
factor in increasing countries’ vulnerability to financial and currency crises, does not
seem to be as significant a factor as was previously thought.
6. Higher per capita incomes make IMF intervention less likely.
7. IMF programmes cannot be shown to have significant positive or negative effects on
the depth of a crisis
2. Tentative explanations and conclusions
From a theoretical point of view, and against the background of the Washington Consensus,
these results provide the basis for considerable rethinking. First, the benefits of free global
capital flows are very difficult to detect in this data set. Economic textbook theory tells us that
open capital accounts can do two things. First, they can help countries which lack capital to
import capital to grow faster. They can borrow from abroad, invest and hence boost growth.
As marginal productivity of capital is higher than in countries which are capital-abundant,
they can easily use the proceeds from their investments to service their debt. Second, open
capital accounts can help countries weather asymmetric shocks. If an unexpected shock
lowers national income, borrowing from abroad can be used to smooth national consumption,
thus increasing welfare.12 As long as domestic consumption has an influence on domestic
output, this should also help reduce the volatility of overall output. Countries which are more
financially open can more easily borrow from abroad, and therefore should be able to
withstand a crisis – such as the recent one – better.
However, the data presented in this paper do not confirm this story. Whether importing capital
is a sensible strategy for sustainably accelerating economic growth has been disputed for a
number of years (see, for example, Prasad, Rajan and Subramanian, 2007). The data set used
in this paper raises doubts about the ability of capital inflows to smooth the economic cycle.
While an open capital account per se does not seem to have a significant influence on the
depth of a crisis for the whole sample, it seems to increase the probability that a global
economic and financial crisis can push a country with such an account into a deep recession.
Moreover, using the possibility of global capital flows, either as an exporter or an importer of
large amounts of capital (as reflected in a large current-account imbalance) clearly and
strongly adds to a country’s vulnerability to a crisis. One plausible explanation would be that
in a financial crisis, such as the current one, access to foreign finance might not be possible
due to a sudden increase in risk aversion among investors, thereby hurting countries that have
relied on external capital inflows. The significant impact on countries with large surpluses
might be explained by the fact that the large surpluses possibly hint at macroeconomic
imbalances in these countries prior to the crisis in the form of permanently insufficient
domestic demand. With borrowers being cut off from the global financial markets during the
current crisis, countries that relied on other countries’ demand growth for their own economic
growth were hit disproportionally, due to the lack of internal demand growth momentum to
make up for the loss of external demand.
The probability of entering a very deep recession might increase in proportion to the openness
of the capital account. This is because capital controls are usually geared more towards short-
term capital flows, and hence a more open capital account means a larger share of volatile
short-term inflows in the overall capital inflows of a country. Given that the benefits of free
capital flows do not seem to materialize as promised to the countries which – at least in the
12 For a typical detailed explanation, see Feenstra andTaylor, 2008, chap. 17.
textbook model – should profit most from them (because they have made most use of
international capital flows), there might be a case for introducing controls and limits on global
Of course it may seem somewhat inappropriate to use the recent crisis as evidence against the
textbook argument of the cushioning effects of global capital flows. After all, the textbook
argument is in general about supply-side shocks to national output, while the origin of the
latest crisis has clearly been a financial one. However, given the magnitude of the crisis and
the fact that most of the economic crises of the past few decades arguably had financial
origins, one has to question the relevance of the argument in favour of insuring against
national supply shocks compared to potential shocks created by international capital flows for
an individual economy.
If one agrees with the necessity of proactive macroeconomic management to limit current-
account imbalances, and the need for bold policy action to counteract potential crises, the
other results are rather easy to explain: moderate rates of inflation (instead of low rates) are
not necessarily a problem, but might provide more space for monetary policy to implement
rate cuts before the zero bound limits further actions. Such a stance could be considered as
supporting the conclusions drawn by a recent IMF paper on the optimum rate of inflation
(Blanchard, Dell’Ariccia and Mauro, 2010). Currency boards are a danger as they create a
false sense of security and make proper macroeconomic management aimed at limiting
current-account imbalances virtually impossible.
More puzzling is the fact that IMF involvement does not seem to have any explanatory power
for the depth of a recession or a slowdown in growth. This result might be uncomfortable both
for the IMF itself as well as its critics. If it turns out to be robust, it would mean that IMF
involvement does not necessarily stabilize economic growth (as measured in GDP terms), nor
does the conditionality attached to IMF programmes exacerbate the short-term impact of a
crisis, as was repeatedly claimed for IMF programmes during the Asian crisis (Stiglitz, 2002).
It might also indicate that there has been a change in the way the IMF designs its adjustment
programmes so as to reduce their negative short-term impact on GDP growth compared with
the IMF programmes of previous decades, as some observers claim (Schieritz, 2010). Turning
this evidence against the IMF would imply that its programmes, while not exacerbating the
economic situation, have not contributed much towards economic stabilization in the latest
From an economic policy perspective, this means that emerging-market economies and
developing countries should think twice about opening up their capital accounts. Should they
decide to open their capital accounts, countries should undertake active macroeconomic
management to prevent the emergence of large current-account imbalances, even if this comes
at the price of higher inflation. Finally, the results are a clear warning against creating a
currency-board framework. Far from providing a stable macroeconomic environment, as
some proponents have long argued, empirically such a framework seems to amplify shocks.
Blanchard O, Dell’Ariccia G and Mauro P (2010). Rethinking macroeconomic policy. IMF
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Chen S and Ravallion M (2009). The impact of the global financial crisis on the world’s
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Schieritz M (2010). Waschlappen aus Washington. DIE ZEIT Nr. 14/2010: 16.
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Table A.1: Impact of the crisis, by country categories
Total sample 179 53 -3.5 2.0 -3.1 10.7 6.1 5.4 0.5
Per capita GDP less
44 26 -1.2 4.3 -7.0 8.8 8.4 5.4 -0.5
Per capita GDP
between $975 and $3
45 14 -2.7 3.3 -3.5 9.4 6.8 6.1 0.3
Per capita GDP
between $3 856 and
42 10 -4.9 1.0 -5.0 13.0 6.3 5.9 0.2
Per capita GDP more
than $11 905
48 3 -5.2 -0.7 2.4 11.7 3.3 4.5 1.8
surplus of less than
5% of GDP
21 0 -3.1 1.8 2.2 2.2 3.8 5.0 1.2
surplus of more than
5% of GDP
40 2 -4.2 2.6 15.8 15.8 7.5 6.8 0.4
deficit of less than 5%
34 14 -2.2 2.6 -2.4 2.4 6.6 4.8 0.1
deficit of more than
5% of GDP
84 37 -3.9 1.3 -13.8 13.8 5.9 5.2 0.5
Severe recession 12 6 -11.5 -5.4 -8.6 11.7 5.8 6.1 1.8
IMF lending in 2009 53 53 -2.9 2.2 -12.3 12.9 6.8 5.1 0.1
Dollarized economies 5 0 -0.6 3.7 -7.9 9.3 3.7 4.3 1.4
13 7 -6.0 -1.0 -18.2 27.9 3.9 5.1 0.8
43 17 -3.2 3.0 -5.0 9.8 8.3 6.2 0.6
Economies with free
23 4 -4.2 -0.1 -1.4 6,1 3.5 4.1 1.3
15 0 -4.3 -1.3 -2.1 6.6 2.2 3.0 2.1
78 24 -3.0 3.0 -0.1 10.8 6.9 5.9 -0.2
Source: Author’s calculations, based on IMF (2009) and the IMF World Economic Outlook database (accessed January 2010).
Publisher: Competence Center “Money, Finance, Trade and Development “
HTW-Berlin – Treskowallee 8, 10318 Berlin
Prof. Dr. Sebastian Dullien, Prof. Dr. Jan Priewe
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