Phoenix miracles in emerging markets: Recovering without credit from systemic financial crises

Arbeitspapier

Using a sample of emerging markets that are integrated into global bond markets, we analyze the collapse and recovery phase of output collapses that coincide with systemic sudden stops, defined as periods of skyrocketing aggregate bond spreads and large capital flow reversals. Our findings indicate the presence of a very similar pattern across different episodes: output recovers with virtually no recovery in either domestic or foreign credit, a phenomenon that we call a Phoenix Miracle, where output 'rises from its ashes', suggesting that firms go through a process of financial engineering to restore liquidity outside formal credit markets. Moreover, we show that the U.S. Great Depression could be catalogued as a Phoenix Miracle. However, in contrast to the U.S. Great Depression, EM output collapses occur in a context of accelerating price inflation and falling real wages, casting doubt on price deflation and nominal wage rigidity as key elements in explaining output collapse, and suggesting that financial factors figure prominently in these collapses.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 570

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Foreign Exchange ; Current Account Adjustment; Short-term Capital Movements ; International Lending and Debt Problems ; Open Economy Macroeconomics
• Thema: Output collapse ; systemic crises ; Great Depression ; Balance of Payments crisis ; Sudden Stop ; capital flows ; Phoenix Miracle ; credit crunch

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Calvo, Guillermo A. ; Izquierdo, Alejandro ; Talvi, Ernesto
• Ereignis: Veröffentlichung
• (wer): Inter-American Development Bank, Research Department
• (wo): Washington, DC
• (wann): 2006

Weitere Informationen

• Handle: http://hdl.handle.net/10419/51514
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ