Severity of the Crisis and its Transmission Channels

The current global crisis, although initially circumscribed to the US housing market, spread rapidly across markets and borders. It has affected almost all countries through different reinforcing channels: the contraction in international trade, capital flows, remittances, and international commodity prices. The main goal of this note is to empirically analyze the mechanisms through which the financial crisis of 2007-2009 propagated throughout the world by characterizing the main factors behind the fall in Gross Domestic Product (GDP) growth rates. The findings indicate that a greater decline in the growth rate was registered in countries with higher de facto trade openness, less resilient domestic financial markets, and, to a lesser extent, improved macroeconomic frameworks. To complement this evidence, we construct an aggregate index of the severity of the crisis that captures the real and financial consequences in each country of this unprecedented global financial shock.

Bibliographic Details

Main Authors:	Calderon, Cesar, Didier, Tatiana
Language:	English
Published:	World Bank, Washington, DC 2009-12
Subjects:	ADVANCED ECONOMIES, AGGREGATE DEMAND, ANNUAL GROWTH, ANNUAL GROWTH RATE, ASSET VALUES, AVERAGE GROWTH, BANKING SYSTEM, BUDGET DEFICITS, BUSINESS CYCLE, CAPITAL FLOW, CAPITAL FLOWS, CAPITAL INFLOWS, CENTRAL BANKS, COMMODITY, COMMODITY PRICES, CONSENSUS FORECAST, CONSENSUS FORECASTS, CORRELATION ANALYSIS, COUNTRY CREDIT, CREDIT GROWTH, CREDIT INTERMEDIATION, CREDIT RATING, CURRENCY, DEBT, DEBT FLOWS, DECELERATION IN GROWTH, DEPENDENT VARIABLE, DEPOSIT, DEVELOPING COUNTRIES, DOMESTIC CREDIT, DOMESTIC CURRENCIES, DOMESTIC DEMAND, DOMESTIC FINANCIAL MARKETS, DOMESTIC FINANCIAL SECTOR, ECONOMIC CONSEQUENCES, ECONOMIC OUTLOOK, EMERGING ECONOMIES, EMERGING MARKET, EMERGING MARKET ECONOMIES, EMPIRICAL EVIDENCE, EMPIRICAL STUDIES, EQUITY HOLDINGS, EXCHANGE RATE, EXCHANGE RATE FLEXIBILITY, EXCHANGE RATES, EXPORTERS, EXPORTS, EXPOSURE, EXTERNAL ASSETS, EXTERNAL DEMAND, EXTERNAL IMBALANCES, EXTERNAL SHOCKS, FEDERAL RESERVE, FEDERAL RESERVE BANK, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL FLOWS, FINANCIAL INSTITUTIONS, FINANCIAL INTERMEDIATION, FINANCIAL MARKET, FINANCIAL OPENNESS, FINANCIAL POLICIES, FINANCIAL SAVINGS, FINANCIAL SECTOR, FINANCIAL SHOCK, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FISCAL POLICIES, FISCAL POLICY, FORECASTS, FOREIGN FUNDS, FOREIGN LIABILITIES, FOREIGN TRADE, GDP, GDP PER CAPITA, GOVERNMENT EXPENDITURES, GOVERNMENT REVENUES, GROWTH RATE, GROWTH RATES, INCOME, INCOME LEVEL, INDEPENDENT VARIABLES, INDUSTRIAL ECONOMIES, INFLATION, INFLATION RATES, INSTITUTIONAL INVESTOR, INTERNATIONAL ECONOMICS, INTERNATIONAL MARKET, INTERNATIONAL TRADE, LOAN, LONG RUN, MACROECONOMIC FRAMEWORK, MACROECONOMIC POLICIES, MACROECONOMIC POLICY, MACROECONOMICS, MARKET FINANCE, MIDDLE INCOME COUNTRIES, MONETARY AREA, MONETARY FRAMEWORKS, MONETARY POLICY, NON-PERFORMING LOANS, OPTIMUM CURRENCY AREA, PORTFOLIO, PRICE INDEX, PRIVATE CONSUMPTION, PROTECTIONISM, REAL ECONOMIC ACTIVITY, REAL EFFECTIVE EXCHANGE RATE, REAL EXCHANGE RATE, REAL GDP, REAL GROWTH RATES, REMITTANCES, RICH COUNTRIES, SCATTER PLOT, SHARE OF EQUITY, SIGNIFICANT EFFECT, STOCK MARKET, STOCK MARKET CAPITALIZATION, STOCK MARKET PRICES, STOCK MARKETS, STOCK PRICE, STOCK PRICES, STOCKS, TOTAL EXPORTS, TRADE CREDIT, TRADE LIBERALIZATION, TRADE OPENNESS, TRADE REGIMES, TRADE VOLUMES, TRADING, TRADING PARTNERS, TROUGH, VOLATILITY, WORLD ECONOMY,
Online Access:	http://documents.worldbank.org/curated/en/2009/12/12806155/severity-crisis-transmission-channels https://hdl.handle.net/10986/10946
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