Exogenous Shocks and Growth Crises in Low-Income Countries: A Vulnerability Index
IMF Working Papers, November 2, 2012
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- Exogenous Shocks and Growth Crises in Low-Income Countries: A Vulnerability Index
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Bibliographic details
- Authors: Era Dabla-Norris, Yasemin Bal Gündüz
- Published: November 2, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475528510.001
Overview
- Paper develops a new index providing early warning signals of a growth crisis in the event of large external shocks in low-income countries.
- Uses a parsimonious set of underlying policy, structural, and institutional indicators mapped into a composite vulnerability index.
- Main finding summarized: vulnerabilities declined significantly from peaks in the early 1990s, but have risen in recent years as fiscal policy buffers were expended in the wake of the global financial crisis.
Methodology
- Multivariate regression analysis is employed to relate indicators to crisis outcomes.
- A univariate signaling approach complements the multivariate analysis to produce early warning signals.
- Underlying information sources: policy, structural, and institutional indicators (parsimonious set).
Key Findings
- Vulnerabilities to a growth crisis in low-income countries:
- Declined significantly from their peaks in the early 1990s.
- Have risen in recent years as fiscal policy buffers were expended after the global financial crisis.
Subject Areas and Keywords
- Subject: Currency markets, Exchange rate arrangements, Export prices, Exports, Financial crises, Financial markets, Foreign exchange, International trade, Prices
- Keywords: confidence interval, crisis probability, Currency markets, Exchange rate arrangements, explanatory variable, Export prices, Exports, Global, growth crises, growth crisis, low-income countries, real GDP growth, terms of trade, Vulnerability index, WP