Exogenous Shocks and Growth Crises in Low-Income Countries: A Vulnerability Index

November 2, 2012

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Format: Chicago

Era Dabla-Norris, and Yasemin Bal Gunduz. Exogenous Shocks and Growth Crises in Low-Income Countries: A Vulnerability Index, (USA: International Monetary Fund, 2012) accessed December 3, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper develops a new index which provides early warning signals of a growth crisis in the event of large external shocks in low-income countries. Multivariate regression analysis and a univariate signaling approach are used to map information from a parsimonious set of underlying policy, structural, and institutional indicators into a composite vulnerability index. The results show that vulnerabilities to a growth crisis in low-income countries declined significantly from their peaks in the early 1990s, but have risen in recent years as fiscal policy buffers were expended in the wake of the global financial crisis.

Subject: Currency markets, Exchange rate arrangements, Export prices, Exports, Financial crises, Financial markets, Foreign exchange, International trade, Prices

Keywords: Confidence interval, Crisis probability, Currency markets, Exchange rate arrangements, Explanatory variable, Export prices, Exports, Global, Growth crises, Growth crisis, Low-income countries, Real GDP growth, Terms of trade, Vulnerability index, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/264
Stock No:

WPIEA2012264
ISBN:

9781475528510
ISSN:

1018-5941

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