Sources of output volatility from financial crisis in emerging markets

We investigate how output fluctuates before and after these financial crises hit the E-7 countries by excluding the crisis period defined earlier from the sample. The E-7 is referred to a group of seven emerging market countries-Thailand, Malaysia, Indonesia, the Philippines, South Korea, Mexico and Argentina. The main focus of this study is on the source of change in output variability whether it is due to the shocks (impulses) or due to the structure (propagation mechanism). Thailand, Argentina and the Philippines have lower output variability after crisis, while South Korea, Mexico, Indonesia and Malaysia have higher output variance. The counterfactual Vector Autoregression (VAR) analysis shows that the source of output variability change is mainly attributable to the change in structure (propagation mechanism) rather than the change in shocks (impulses) for the E-7, except the Philippines.