Compounded Effects of External Crises on GDP Growth

This paper attempts to quantify possible negative effects of external crises on output in emerging market economies. The external crises considered are the current account reversals and currency crises. The direct effect (on GDP growth) and the indirect effect (through growth determinants) of an external crisis are estimated and compounded into an overall effect. An alternative approach to the analysis of the adjustment dynamics is applied. Comparative Economic Studies (2007) 49, 642–659. doi:10.1057/palgrave.ces.8100217