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The role of domestic fundamentals on the economic vulnerability of emerging markets

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  • Rocha, Katia
  • Moreira, Ajax

Abstract

This paper empirically evaluates policies that can potentially reduce the economic vulnerability of emerging market economies. Through panel data estimation on a group of 23 countries, we relate sovereign spreads to global risk shocks, and explore the argument suggested by Calvo (2003) which focuses on macroeconomic fundamentals as multipliers of external shocks. The results support policies towards financial liberalization, public debt management, consistent economic growth, development of the domestic financial market and improvements in governance indicators. We argue that those policies were crucial for the projected rapid economic rebound of the emerging market economies facing the global crisis of 2007-2009.

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  • Rocha, Katia & Moreira, Ajax, 2010. "The role of domestic fundamentals on the economic vulnerability of emerging markets," Emerging Markets Review, Elsevier, vol. 11(2), pages 173-182, June.
    • Handle: RePEc:eee:ememar:v:11:y:2010:i:2:p:173-182
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    3. Carlos A. Carrasco & Jesus Ferreiro, 2014. "Latin American inflation differentials with USA inflation: does Inflation Targeting make a difference?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 17(1), pages 13-32, March.
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    5. Kady Keita & Mr. Gene L. Leon & Frederico Lima, 2019. "Do Financial Markets Value Quality of Fiscal Governance?," IMF Working Papers 2019/218, International Monetary Fund.
    6. Mr. Andrea F Presbitero & Mr. Dhaneshwar Ghura & Mr. Olumuyiwa S Adedeji & Lamin Njie, 2015. "International Sovereign Bonds by Emerging Markets and Developing Economies: Drivers of Issuance and Spreads," IMF Working Papers 2015/275, International Monetary Fund.
    7. Xiaofen Zhang & Zibibula Simayi & Shengtian Yang & Yusuyunjiang Mamitimin & Fang Shen & Yunyi Zhang, 2023. "Vulnerability Assessment of Ecological–Economic–Social Systems in Urban Agglomerations in Arid Regions—A Case Study of Urumqi–Changji–Shihezi Urban Agglomeration," Sustainability, MDPI, vol. 15(6), pages 1-17, March.
    8. Davor Kunovac, 2013. "The Borrowing Costs of Selected Countries of the European Union – the Role of the Spillover of External Shocks," Working Papers 38, The Croatian National Bank, Croatia.
    9. Fengting Zhang & Yang Lv & Md Nazirul Islam Sarker, 2022. "Spatio-Temporal Evolution and Development Path of Industry–University–Research Cooperation and Economic Vulnerability: Evidence from China’s Yangtze River Economic Belt," Sustainability, MDPI, vol. 14(19), pages 1-19, October.
    10. Unver, Mustafa & Dogru, Bulent, 2015. "The Determinants of Economic Fragility: Case of the Fragile Five Countries," MPRA Paper 68734, University Library of Munich, Germany, revised 2015.
    11. Kady Keita & Gene Leon & Frederico Lima, 2021. "Do Financial Markets Value Quality of Fiscal Governance?," Open Economies Review, Springer, vol. 32(5), pages 907-931, November.

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