## _wp14173

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### Key findings and stylized facts
- Post-global financial crisis (GFC) growth pattern in emerging markets (EMs):
  - Many EMs experienced a swift rebound after the GFC, followed by stubbornly slower growth since 2011.
  - EMs’ average annual output growth in 2013 was 1½ percentage points lower than during 2010–11.
  - Output growth slowed in about three-fourths of all EMs in 2013.
- Forecast surprises and timing:
  - More than 70 percent of the 50 largest EMs experienced negative growth surprises in 2012–13 relative to WEO forecasts published 12-months earlier.
  - Cumulative real GDP growth of G-20 advanced economies during 2012–2013 was 0.3 percentage points lower than WEO projections.
  - Cumulative growth surprise of G-20 emerging markets amounted to 2.4 percent in that same period.
  - It takes 4–6 months for forecasts to fully reflect new information (Loungani, Stekler, and Tamirisa, 2013).
- Drivers of slowdowns:
  - Key external factor: lower trading partner demand growth for the average EM during 2011–13.
  - Changes in external financing conditions did not play a key role in the slowdowns.
  - Domestic factor: withdrawal of fiscal stimulus enacted after Lehman compounded weaker external demand.
  - Idiosyncratic factors and structural bottlenecks produced larger unexplained residuals in some countries.
- Synchronization, incidence, and duration:
  - Emerging Asia decelerated first: growth slowed in about 90 percent of its countries in early 2011.
  - By 2012Q3, over 85 percent of EMs in the sample were decelerating simultaneously.
  - The GFC episode had the highest incidence but shortest duration of synchronized deceleration; the post-GFC slowdown had a longer duration, with more than 60 percent of EMs decelerating simultaneously for almost two years.
- Revisions and forecasting performance:
  - Average real GDP growth in EMs was revised down by 1.1 percentage points between WEO Fall 2012 and WEO Fall 2013.

### Empirical approach, data, and scope
- Focus:
  - Drivers of growth surprises (actual minus WEO projections published 12 months earlier) and synchronized slowdowns in EMs post-GFC.
- Sample and period:
  - Panel of 60 EMs for annual observations 2011–13 for growth-surprise regressions; broader cross-regional EM sample for synchronized slowdowns.
- Key empirical exercises:
  - Section IV: model of EM growth surprises (actual minus previous-year WEO projection).
  - Section V: model of synchronized slowdowns and decomposition of external versus domestic contributions.
  - Section III: documentation of EM recovery and post-recovery slowdowns, with historical comparisons.
- Growth surprise definition:
  - Actual real GDP growth rate for country i in year t minus projected real GDP growth rate one-year ahead as published in the IMF’s World Economic Outlook (Fall edition) of the previous year.
- Main explanatory variables:
  - Trading partners’ growth surprises (weighted by exports-to-GDP).
  - Terms-of-trade surprises.
  - Fiscal surprises: gap (in percent of GDP) between actual and projected change in general government total expenditure.
  - Controls: VIX, country initial conditions (financial openness, output gap, REER overvaluation in 2010).
- Estimation method:
  - Pooled OLS with robust standard errors; time-fixed effects excluded due to short time span; initial conditions partly control for time-invariant heterogeneity.

### Empirical findings — Growth surprises (2011–13)
- External factors dominate:
  - Trading partners' growth surprise (Advanced partners): 0.022*** (0.007) in columns (1)-(3); up to 0.019*** (0.007) in other specifications.
  - Residual trading partners' growth surprise (Emerging and developing partners): examples include 0.016** (0.006), 0.013** (0.005), 0.011** (0.005).
  - Terms-of-trade surprise: 0.070*** (0.015), 0.060*** (0.015), 0.048*** (0.018) in selected models.
  - Change in VIX index: 0.027* (0.014), 0.030** (0.013) in selected models.
  - China’s growth surprises were positive and statistically significant in most models.
- Domestic factors:
  - Output gap in 2010: -0.204*** (0.062) in one specification (countries with positive gap in 2010 experienced negative subsequent growth surprises).
  - Fiscal surprises had negative coefficients (examples: -0.094 (0.117), -0.148 (0.098), -0.110 (0.103), -0.114 (0.077)) and were not statistically significant.
- Model fit:
  - R-squared values across specifications: 0.05, 0.06, 0.06, 0.08, 0.13, 0.17, 0.27 (by column).

### Empirical findings — Synchronized slowdowns and decomposition (2011–13)
- Estimation setup:
  - Pooled panel OLS with yearly real GDP growth as dependent variable.
  - Domestic factors: change in cyclically adjusted primary balance to potential GDP, exchange rate regime (peg dummy), change in policy rate.
  - External factors: trading partners’ import demand growth, terms of trade, VIX, US bond yields.
  - Initial conditions: REER overvaluation, output gap, financial openness, commodity exporter dummy (measured in 2010).
- Key coefficients and signs (selected from Table 2):
  - Trading partners' import demand (* Exports to GDP): 0.43***, 0.47***, 0.43***, 0.35* across columns (1)-(4).
  - Change in cyclically adjusted primary balance to potential GDP: -0.23** to -0.19** (contractionary fiscal stance associated with lower growth).
  - Initial REER overvaluation: -0.071** to -0.062**.
  - Initial financial openness: large negative coefficients in some columns (e.g., -0.99***, -0.83***, -1.008***).
  - Peg Dummy: -3.35***, -2.89***, -2.97*** (pegged regimes associated with lower growth).
  - Interaction Financial Openness * Peg: 2.59***, 2.19***, 2.10*** (financially open peggers experienced growth improvements).
  - Balance on financial account to GDP: 0.15* to 0.19** in some columns.
  - Observations: 72; R-squared: 0.25 to 0.48 across columns.
- Decomposition results (using coefficients from column 3):
  - All EMs experienced deterioration in trading partners’ import demand from 2010 until 2013.
  - Fiscal policy: average EM accommodative between 2011 and 2012; contractionary between 2012 and 2013.
  - Unexplained component (model residual) larger for average EM between 2012 and 2013 than between 2011 and 2012, suggesting domestic/idiosyncratic structural factors.

### Cross-country heterogeneity and country-level decomposition
- Country-level findings (Table 2 column 4 specification, interaction with exports-to-GDP):
  - Many less-open EMs: non-external factors explained a large share of slowdown.
  - Examples with large unexplained components: Argentina, Turkey, and to a lesser extent India.
  - Figure 10 ranks countries by contribution of external factors and shows components: Unexplained component, Fiscal policy, External component (change in percentage points).

### Separating Advanced Markets, EMDEV, and China trading partner effects (Table 3)
- Specifications splitting trading partners:
  - AM trading partners' growth: 2.79***, 2.48***, 2.45*** across columns.
  - EM trading partners' growth orthogonal to AMs: 0.83** in column (1); loses significance when China is controlled for.
  - China trading partners' growth orthogonal to AMs: 1.35***, 1.37*** in columns (1)-(2).
  - Change in cyclically adjusted primary balance: -0.19*** to -0.17**.
  - Initial output gap: -0.27*** to -0.34***.
  - Initial financial openness: -0.81***, -0.82***, -0.82***.
  - Peg Dummy: -3.55***, -3.29***, -3.26***; Interaction Initial financial Openness * Peg: 2.22***, 2.12***, 2.10***.
  - Observations: 72; R-squared: 0.56–0.57.

### Pre-crisis (2000–07) versus post-crisis drivers
- Pre-crisis regression (2000–07; country and year fixed effects; observations 179; R-squared 0.35):
  - Trading partners' import demand: 0.20* (about half the magnitude identified post-crisis).
  - Change in cyclically adjusted primary balance to potential GDP: 0.012 (not significant).
  - Peg Dummy: 0.19 (not significant).
  - Financial openness and interactions: not strongly significant.
- Interpretation:
  - Trade with Advanced Markets mattered pre-crisis; fiscal policy mattered more post-crisis.
  - Literature cited on fiscal multipliers: government spending multipliers tend to be larger in recessions.

### Regional heterogeneity of output gaps and revisions to potential output
- WEO medium-term (five-year-ahead) projection revisions:
  - Revised down by 0.7 percentage points for emerging markets and by 0.1 percent for advanced economies during the period.
  - Downward revisions in near-term growth accompanied by revisions in medium-term growth forecasts, suggesting reexamination of potential output.
- Output gap proxies:
  - (a) Time-fixed: difference between actual real growth and average growth during 1993–2008.
  - (b) Time-varying: filter-based output gap with controls for end-point bias using IMF WEO out-of-sample forecasts to end-2015.
- Observations from proxies:
  - Strong co-movement of output gaps across regions with large negative mass around major crisis periods.
  - European emerging markets: highest gap volatility (boom-bust cycles).
  - Emerging Asia: positive gaps after the GFC.
  - Latin America: small positive gap due to strong commodities prices in 2010–11.
  - Time-fixed gaps turned negative while time-varying gaps were almost closed in the post-GFC deceleration, highlighting potential reductions in potential output.

### Structural and policy-relevant observations
- Fiscal policy:
  - Withdrawal of fiscal stimulus after the crisis contributed materially to growth slowdowns in many EMs.
  - Pre-crisis countercyclical fiscal behavior provided fiscal space that supported stronger recoveries.
- External demand and trade:
  - Weakness in trading partners’ demand volumes is the primary external channel for the 2011–13 slowdown.
  - Decomposition analyses quantify trading partners’ contributions to slowdowns.
- Exchange rate regime and financial openness:
  - Pegged regimes associated with lower growth; financially open peggers experienced growth improvements (positive interaction effect).
- Idiosyncratic structural bottlenecks:
  - Larger unexplained residuals in some countries suggest supply-side constraints and potential lasting impairments to growth.

### Policy implications and conclusions
- Core conclusions:
  - Growth surprises (2011–13) were largely driven by external factors: advanced trading partners’ growth surprises, terms-of-trade surprises, changes in global risk aversion; China’s residual surprises also important.
  - Synchronized slowdowns after the GFC were associated with weaker trading partner import demand, less accommodative fiscal policy (higher primary balances), initial overheating (positive output gaps), and initial REER overvaluation.
  - Idiosyncratic structural bottlenecks played a role in some countries.
- Policy takeaways:
  - If post-GFC slowdown reflects a structural reduction in potential output, EMs may need supply-side reforms to boost productivity and move up the value chain; otherwise slower growth may persist and generate imbalances.
  - Fiscal policy sequencing matters: withdrawal of post-crisis stimulus contributed to slowdowns; countries with pre-crisis fiscal space were better able to support recoveries.
  - Policy responses should be tailored to country-specific drivers, including addressing structural bottlenecks and considering fiscal space and external demand conditions.

*Source: _wp14173 — IMF staff chapter text, figures, tables, and references contained in the provided PDF excerpt.*

### References .............................................................................................................

### _wp14173 - References

### Figures and Tables Inventory
- Figures listed:
  - 1. G20: Cumulative Growth Surprises, 2012–13
  - 2. Emerging Markets Recovery from Global Financial Crisis
  - 3. Incidence of Deceleration Spells in Emerging Markets
  - 4. WEO Revisions to Real GDP Growth
  - 5. Output Gap Estimates Based on Pre-crisis Period Versus Full Sample Period
  - 6. Factors Contributing to EM Growth Surprises, 2011–13
  - 7. Factors Contributing to EM Growth Slowdowns, 2011–13
  - 8. Trading Partners' Import Demand Volumes, 2011–13
  - 9. Change in Fiscal Impetus, 2011–13
  - 10. Decomposition of Sources of Slowdowns by Country, 2011–13
- Tables listed:
  - 1. Determinants of Growth Surprises in Emerging Market Economies, 2011–13
  - 2. Determinants of Slowdowns in Emerging Market Economies, 2011–13
  - 3. Decomposing Trading Partners’ Contribution to Slowdowns, 2011–13
  - 4. Determinants of EM Growth Pre-Global Financial Crisis, 2000–07

### Key Findings and Stylized Facts (from the chapter text)
- Post-GFC EM growth pattern:
  - Many emerging markets experienced a swift rebound after the global financial crisis, followed by stubbornly slower growth since 2011.
  - EMs’ average annual output growth in 2013 was 1½ percentage points lower than during 2010–11 when post-crisis recovery peaked.
  - Output growth slowed in about three-fourths of all emerging markets in 2013.
- Forecast surprises and timing:
  - More than 70 percent of the 50 largest EMs experienced negative growth surprises in 2012–13 relative to IMF’s World Economic Outlook (WEO) forecasts published 12-months earlier.
  - The cumulative real GDP growth of the G-20 advanced economies during 2012–2013 was 0.3 percentage points lower than WEO projections.
  - The cumulative growth surprise of G-20 emerging markets amounted to 2.4 percent in that same period.
  - It takes 4–6 months for forecasts to fully reflect new information (Loungani, Stekler, and Tamirisa, 2013).
- Drivers and contributions to slowdowns:
  - For the average emerging market, lower trading partner demand growth was a key external factor explaining slowdowns during 2011–13.
  - Changes in external financing conditions have yet to play a key role in the slowdowns.
  - Domestic factors: withdrawal of the fiscal stimulus enacted after the Lehman collapse is a relevant domestic factor compounding weaker external demand.
  - Idiosyncratic factors and structural bottlenecks contributed to larger unexplained residuals in certain countries, suggesting potential lasting impairments to growth.
- Regional heterogeneity in recovery and slowdown:
  - Emerging Asia and Latin America recovered quickest after the GFC; emerging Europe was more severely affected and slower to recover, with negative output gaps persisting.
  - During 2010–2011 recovery, countries that (i) gave a bigger fiscal stimulus, (ii) had faster growing trading partners, (iii) had better pre-crisis fundamentals, and (iv) followed flexible exchange rate regimes recovered faster (IMF, 2010).
  - Preliminary evidence suggests countries that were countercyclical in the run up to the crisis had fiscal space to spend in adverse times; pro-cyclical policies in good times exacerbated downturns in bad times.
- Synchronization, incidence, and duration of decelerations:
  - Emerging Asia first decelerated, with growth slowing in about 90 percent of its countries in early 2011.
  - More than 80 percent of the Middle East and South Africa group faced a slowdown by end-2011.
  - By 2012Q3 over 85 percent of the EMs in the sample were decelerating simultaneously.
  - The GFC episode had the highest incidence of EMs decelerating simultaneously but the shortest duration: two quarters after the peak the share decelerating dropped abruptly, approaching zero within one year (related to the V-shaped recovery of 2009–2010).
  - The post-GFC slowdown that followed the GFC had a longer duration than previous episodes, with more than 60 percent of EMs decelerating simultaneously for almost two years.
- Revisions and forecasting performance:
  - Average real GDP growth in emerging markets was revised down by 1.1 percentage points between the WEO Fall 2012 publication and the WEO Fall 2013 publication.

### Empirical Approach and Scope
- Focus:
  - The paper studies drivers of growth surprises (deviations of actual real GDP growth from WEO projections published 12 months earlier) and synchronized slowdowns in EMs post-GFC.
- Sample:
  - A larger sample across Latin America, Eastern Europe, Emerging Asia, MENA, and South Africa is used to emphasize country heterogeneity in a non-crisis episode of synchronized slowdowns.
- Empirical exercises described:
  - Section IV: model of EM growth surprises (actual minus previous-year WEO projection).
  - Section V: model of synchronized slowdowns and decomposition of external versus domestic contributions.
  - Section III: documentation of EM recovery and post-recovery slowdowns, with comparisons to prior crisis episodes.

### Literature Connections and Comparative Findings
- Earlier findings:
  - Blanchard, Das, and Faruqee (2010): financial shocks mattered more than terms-of-trade shocks during the acute GFC phase; countries with high short-term external debt suffered larger output declines.
  - Didier, Hevia, and Schmukler (2012): improved EM fiscal space and healthier balance sheets enabled countercyclical policies, aiding resilience.
  - IMF (2013, 2014a, 2014b) and other regional studies: emphasize both cyclical unwinding and structural deterioration (e.g., potential growth and TFP declines) across BRICS, ASEAN-5, China, India, and Latin America.
  - Cubeddu et al. (2014): higher 2000s growth reflected improved fundamentals and strong demand/productivity tailwinds; transitory productivity surges imply supply-side constraints could limit future growth; recommend structural reforms and macro policy reprioritization.
  - Aiyar et al. (2014): link growth decelerations to institutional/structural factors and the middle-income trap (long sample 1955–2009).
- Positioning of this paper:
  - Complements nascent literature by focusing explicitly on post-crisis period, using a broader cross-regional EM sample, and highlighting the role of country heterogeneity in a first non-crisis synchronized slowdown.

### Structural and Policy-relevant Observations Highlighted
- Fiscal policy:
  - Withdrawal of fiscal stimulus after the crisis contributed materially to growth slowdowns in many EMs.
  - Pre-crisis countercyclical fiscal behavior provided fiscal space that supported stronger recoveries.
- External demand and trade:
  - Weakness in trading partners’ demand volumes is a primary external channel for the 2011–13 slowdown.
  - Decomposition analyses (figures and tables listed) are used to quantify trading partners’ contributions to slowdowns.
- Heterogeneity implies policy responses should be tailored to country-specific drivers, including:
  - Addressing structural bottlenecks that can impair medium-term potential growth.
  - Considering fiscal space and the timing/magnitude of stimulus withdrawal in the context of external demand conditions.

*Source: _wp14173 - References, IMF staff chapter text and figure/table listings contained in the provided PDF excerpt.*

### 0.4 percent for advanced economies (Figure

### _wp14173 - 0.4 percent for advanced economies (Figure

### Revisions to growth and potential output
- WEO’s medium term projection (gauged as the five-year-ahead growth forecast) was revised down by 0.7 percentage points for emerging markets, against a 0.1 percent revision for advanced economies, during this period.
- Downward revisions in near-term growth were accompanied by revisions in the medium term growth forecast, suggesting part of the slowdown reflected a reexamination of potential output.
- Figure 4 (WEO Revisions to Real GDP Growth, Fall 2013 versus Fall 2012) shows:
  - Advanced: -1.2 to 0.0 range depicted (chart axis); label indicates “2013 Medium term 1/ Advanced”.
  - Emerging and developing: depicted alongside advanced in percentage points.

### Regional heterogeneity of output gaps
- Two proxies for potential output used:
  - (a) time-fixed: difference between actual real growth rate and the average growth rate during the 15 years preceding the global financial crisis (1993–2008);
  - (b) time-varying: traditional filter-based estimates of the output gap with controls for end-point bias using IMF WEO out-of-sample forecasts of quarterly real GDP until end-2015.
- Key observations (Figure 5 and associated text):
  - Strong co-movement of output gaps across regions with large “negative mass” around major crisis periods.
  - European emerging markets have the highest “gap volatility” (boom-bust cycles).
  - Emerging Asia experienced positive gaps after the GFC.
  - Latin America had a small positive gap due to strong commodities prices in 2010–11.
  - Gaps based on a time-fixed benchmark turned negative while gaps based on the time-varying proxy were almost closed in the post-GFC deceleration, highlighting potential reductions in potential output (see IMF (2013) and Tsounta (2014) as cited).

### Measuring and modeling EM growth surprises (2011–13)
- Growth surprise definition: actual real GDP growth rate for country i in year t minus the projected real GDP growth rate for that country one-year ahead as published in the IMF’s World Economic Outlook (Fall edition) of the previous year.
- Explanatory variables in the panel regressions:
  - Trading partners’ growth surprises (weighted by exports-to-GDP).
  - Terms-of-trade surprises.
  - Fiscal surprises: gap (in percent of GDP) between actual and projected change in general government total expenditure in each year.
  - Controls: global volatility (VIX) and country-specific initial conditions (financial openness, output gap, REER overvaluation in 2010).
- Data and estimation:
  - Panel of 60 emerging markets, annual observations for 2011–13.
  - Pooled OLS with robust standard errors.
  - Time-fixed effects excluded due to short time span; country-fixed effects not used but partially controlled via time-invariant initial conditions.

### Empirical findings on growth surprises
- External factors dominate:
  - Contribution of growth surprises in advanced trading partners is positive and statistically significant, accounting for the bulk of surprise spells in most EMs.
  - China’s growth surprises were positive and statistically significant in most models.
  - Terms-of-trade surprises are positive and significant.
  - Changes in the VIX index were positive and significant, implying rises in global risk aversion were associated with positive growth surprises in EMs (possible sampling effect noted).
- Domestic factors:
  - Among initial conditions (output gap, financial openness, REER overvaluation in 2010), only the output gap was statistically significant: countries with a positive gap in 2010 experienced negative growth surprises subsequently.
  - Fiscal surprises had the incorrect sign (negative) in all models and were not statistically significant.
- Regression summary (selected coefficients from Table 1; standard errors in parentheses; significance indicated):
  - Trading partners' growth surprise (Advanced partners): 0.022*** (0.007) in columns (1)-(3); up to 0.019*** (0.007) in other specifications.
  - Residual trading partners' growth surprise (Emerging and developing partners): coefficient examples include 0.016** (0.006), 0.013** (0.005), 0.011** (0.005).
  - Terms-of-trade surprise: 0.070*** (0.015), 0.060*** (0.015), 0.048*** (0.018) in selected models.
  - Change in VIX index: 0.027* (0.014), 0.030** (0.013) in selected models.
  - Output gap in 2010: -0.204*** (0.062) in one specification.
  - Fiscal surprise examples: -0.094 (0.117), -0.148 (0.098), -0.110 (0.103), -0.114 (0.077) — not significant.
  - R-squared values across model specifications: 0.05, 0.06, 0.06, 0.08, 0.13, 0.17, 0.27 (by column).

### Explaining synchronized slowdowns (2011–13)
- Specification: pooled panel OLS with yearly real GDP growth as dependent variable; domestic factors include change in cyclically adjusted primary balance to potential GDP (fiscal policy), exchange rate regime (peg dummy), change in policy rate (monetary); external factors include trading partners’ import demand growth, terms of trade, VIX, US bond yields; initial conditions measured in 2010 include REER overvaluation, output gap, financial openness, and commodity exporter dummy.
- Main findings (Table 2, selected coefficients and significance):
  - Trading partners' import demand (* Exports to GDP) 1/: 0.43***, 0.47***, 0.43***, 0.35* across columns (1)-(4).
  - Change in cyclically adjusted primary balance to potential GDP: -0.23** to -0.19** across columns (contractionary fiscal stance associated with lower growth).
  - Initial output gap: coefficients range from -0.06 to -0.16 (varying significance).
  - Initial REER overvaluation: -0.071** to -0.062** in selected columns.
  - Initial financial openness: strong negative coefficients in some columns, e.g., -0.99***, -0.83***, -1.008***.
  - Peg Dummy: -3.35***, -2.89***, -2.97*** (pegged regimes associated with lower growth), but interaction Financial Openness * Peg: positive and significant (2.59***, 2.19***, 2.10***), indicating financially open peggers experienced growth improvements.
  - Balance on financial account to GDP: 0.15* to 0.19** in some columns.
  - Change in VIX index: mixed/sign-insignificant in baseline specifications.
  - Observations: 72; R-squared: 0.25 to 0.48 across columns.
- Decomposition of the growth slowdown (using coefficients from column 3):
  - All EMs experienced deterioration in trading partners’ import demand from 2010 until 2013.
  - Fiscal policy for the average EM was accommodative between 2011 and 2012, contractionary between 2012 and 2013.
  - The unexplained component of the slowdown (model residual) was larger for the average EM between 2012 and 2013 than between 2011 and 2012, possibly reflecting domestic or idiosyncratic structural factors.
- Figures cited:
  - Figure 7: Regression-based estimates of contributions to EM slowdown, 2011–2013 — shows weakening trading partners' import demand, fiscal stimulus 2011-12/unwinding 2012-13, and unexplained component for 2011–2012 and 2012–2013.
  - Figure 8: Trading Partners’ Import Demand Volumes, 2011–13 — country-level changes shown (change in annual growth, in percentage points).
  - Figure 9: Change in Fiscal Impetus, 2011–13 — change in cyclically adjusted primary balance to potential GDP, in percent.

### Cross-country heterogeneity and decomposition
- Country-level decomposition (using Table 2 column 4 specification and interaction with exports-to-GDP):
  - Figure 10 ranks countries by contribution of external factors and shows for many less-open EMs non-external factors explained a large share of slowdown.
  - Examples highlighted: Argentina, Turkey, and to lesser extent India had a large unexplained component exacerbating the slowdown.
  - Figure 10 displays decomposition from 2011 to 2013 for many EMs with components: Unexplained component, Fiscal policy, External component (change in percentage points).

### Separating AM, EM, and China trading partner effects
- Approach: split trading partners into Advanced Markets (AM), Emerging and Developing (EMDEV), and China; compute residual surprises (EMDEV residual surprise orthogonal to AM; China residual orthogonal to AM) and include them in regressions.
- Table 3 selected results (observations 72; R-squared 0.56–0.57):
  - AM Trading partners' growth: 2.79***, 2.48***, 2.45*** across columns.
  - EM Trading partners' growth, orthogonal to AMs: 0.83** in column (1); loses significance in columns controlling for China.
  - China Trading partners' growth, orthogonal to AMs: 1.35***, 1.37*** in columns (1)-(2).
  - Change in cyclically adjusted primary balance to potential GDP: -0.19*** to -0.17**.
  - Initial output gap: -0.27*** to -0.34***.
  - Initial financial openness: -0.81***, -0.82***, -0.82***.
  - Peg Dummy: -3.55***, -3.29***, -3.26***; Initial financial Openness * Peg: 2.22***, 2.12***, 2.10***.

### Pre-crisis (2000–07) vs post-crisis drivers
- Pre-crisis regression (2000–07) analogous to Table 2 column 3 but with country and year fixed effects (observations 179; R-squared 0.35):
  - Trading partners' import demand: 0.20* (significant but about half the magnitude identified post-crisis).
  - Change in cyclically adjusted primary balance to potential GDP: 0.012 (not significant).
  - Peg Dummy: 0.19 (not significant).
  - Financial Openness and interactions: not strongly significant.
- Interpretation:
  - Trade with AMs mattered pre-crisis; fiscal stimulus mattered more post-crisis.
  - Literature on fiscal multipliers across the cycle cited: government spending multipliers tend to be larger in recessions.

### Conclusions and policy implications
- Growth surprises (2011–13) largely driven by external factors: advanced trading partners’ growth surprises, terms-of-trade surprises, changes in global risk aversion; China’s residual surprises also important.
- Domestic fiscal surprises had unexpected negative signs and were not statistically significant in the growth-surprise regressions.
- Synchronized slowdowns after the GFC were associated with:
  - Weaker trading partner import demand;
  - Less accommodative fiscal policy (higher primary balances);
  - Initial overheating (positive output gaps);
  - Initial REER overvaluation.
- Exchange rate regime effects:
  - Flexible exchange rate regimes associated with faster growth.
  - Financially open peggers experienced growth improvements (positive interaction effect).
- Idiosyncratic structural bottlenecks (unexplained residuals) played a role in some countries and could imply need for supply-side reforms.
- Policy takeaway: if the post-GFC slowdown reflects a structural reduction in potential output, EMs may need supply-side reforms to boost productivity and move up the value chain, otherwise slower growth may persist and generate imbalances.

*Source: IMF staff analysis and empirical results from the provided chapter content.*

### REFERENCES

### _wp14173 - REFERENCES

### IMF Working Papers and Staff Notes
- Aiyar, Shekhar, Romain Duval, Damien Puy, Yiqun Wu, and Longmei Zhang, 2013,“Growth Slowdowns and the Middle-Income Trap,” IMF Working Paper 13/71 (Washington: International Monetary Fund).
- Anand, Rahul, Kevin C. Cheng, Sidra Rehman, and Longmei Zhang, 2014, “Potential Growth in Emerging Asia,” IMF Working Paper 14/2 (Washington: International Monetary Fund).
- Baum, Anja, Marcos Poplawski-Ribeiro, and Anke Weber, 2012, “Fiscal Multipliers and the State of the Economy,” IMF Working Paper No. 12/286.
- Culiuc, Alexander, 2014, “External Factors and Medium-term Economic Growth,” IMF Working Paper (forthcoming) (Washington: International Monetary Fund).
- Perrelli, Roberto, and Shaun Roache, 2014, ‘‘Time-Varying Neutral Interest Rate-----The Case of Brazil,’’ IMF Working Paper 14/84 (Washington: International Monetary Fund).
- Sosa, Sebastián, Evridiki Tsounta and Hye Sun Kim, 2013, ‘‘Is the Growth Momentum in Latin America Sustainable?’’ IMF Working Paper 13/109 (Washington: International Monetary Fund).
- Tsounta, Evridiki, 2014, ‘‘Slowdown in Emerging Markets: A Sign of a Bumpy Road Ahead?,’’ IMF Working Paper (forthcoming) (Washington: International Monetary Fund).

### IMF Publications and Staff Discussion Notes
- Cubeddu, Luis, Alexander Culiuc, Ghada Fayad, Yuan Gao, Kalpana Kochhar, Annette Kyobe, Ceyda Oner, Roberto Perrelli, Sarah Sanya, Evridiki Tsounta, and Zhongxia Zhang, 2014, “Emerging Markets in Transition: Growth Prospects and Challenges,” Staff Discussion Note 14/6 (Washington).
- International Monetary Fund, 2010, “How Did Emerging Markets Cope in the Crisis?”(Washington: International Monetary Fund).
- International Monetary Fund, 2012, “Resilience in Emerging Market and Developing Economies: Will it last?” in World Economic Outlook, October 2012 (Washington: International Monetary Fund).
- International Monetary Fund, 2013, “Global Prospects and Policies,” in World Economic Outlook, October (Washington: International Monetary Fund).
- International Monetary Fund, 2014a, “Does Growing Trade and Financial Integration Make Asian Economies Move More in Sync?,” in Asia and Pacific Regional Economic Outlook, April (Washington: International Monetary Fund).
- International Monetary Fund, 2014b, “On the Receiving End? External Conditions and Emerging Market Growth Before, During, and After the Global Financial Crisis,” in World Economic Outlook, April (Washington: International Monetary Fund).

### Journal Articles, Books, and Other Working Papers
- Aslund, Anders, 2013, “Why Growth In Emerging Economies is Likely to Fall,” Working Paper Series 13-10. (Washington, DC: Peterson Institute for International Economics).
- Auerbach, Alan J., and Yuriy Gorodnichenko, 2012, “Fiscal Multipliers in Recession and Expansion,” NBER Working Paper No. 17447.
- Basu, Susanto, and John Fernald, 2001, “Why Is Productivity Procyclical? Why Do We Care?” In New Developments in Productivity Analysis, ed. by Charles R. Hulten, Edwin R. Dean, and Michael J. Harper (Cambridge, Massachusetts: National Bureau of Economic Research).
- Blanchard, Olivier, Mitali Das, and Hamid Faruqee, 2010, "The Initial Impact of the Crisis on Emerging Market Countries," Brookings Papers on Economic Activity, Spring, pp. 263-307.
- Blanchard, Olivier, and Daniel Leigh, 2013, “Growth Forecast Errors and Fiscal Multipliers,” NBER Working Paper No. 18779.
- Claessens, Stijn, Giovanni Dell'Ariccia, Deniz Igan, and Luc Laeven, 2010, "Cross-Country Experiences and Policy Implications from the Global Financial Crisis," Economic Policy 25, no. 62, pp. 267–93.
- Didier, Tatiana, Constantino Hevia, and Sergio L. Schmukler, 2012, “How resilient and countercyclical were emerging economies during the global financial crisis?” Journal of International Money and Finance 31 (8), pp. 2052–2077.
- Levy-Yeyati, Eduardo, and Federico Sturzenegger, 2003, "To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth,” American Economic Review 93 (4), pp. 1173-1193.
- Loungani, Prakash, Herman Stekler, and Natalia Tamirisa, 2013, “Information Rigidity in Growth Forecasts: Some Cross-Country Evidence,” International Journal of Forecasting 29, pp. 605–621.
- Tsangarides, Charalambos G., 2012, “Crisis and Recovery: Role of the Exchange Rate Regime in Emerging Market Economies,” Journal of Macroeconomics 34, pp. 470–488.

*Source: _wp14173 - REFERENCES (IMF PDF).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp14173.pdf_