Growth, Inequality and Development in the Aftermath of the Great Recession
Edited by Hasan Cömert and Rex A. McKenzie
Chapter 1: The impacts of the 2008 global financial crisis on developing countries: the case of the 15 most affected countries
Benefiting from an event analysis, we investigate the transmission mechanism through which the recent global crisis impacted the 15 worst affected countries and the reasons behind the weak performances of these countries. The overall evidence shows that the trade channel was the most important mechanism in the transmission of the crisis from advanced economies to developing countries. The role of the financial channel varied in different countries. Some countries encountered massive financial reversals; some others experienced different degrees of financial stops. In general, as expected, the most affected countries in our set are the ones that experienced both financial reversals and a dramatic decline in their exports. Although almost all these countries experienced spectacular growth performances from 2002 to 2008, they also accumulated significant vulnerabilities, which were mainly related to the structural problems of their integration into the world economy during the same time period. Furthermore, those countries that were unwilling or unable to conduct considerable countercyclical fiscal and monetary policies were among the most affected ones in our sample.