This paper investigates the extent to which output has recovered from the Asian crisis. A regime-switching approach that introduces two state variables is used to decompose recessions in a set of six Asian countries into permanent and transitory components. While growth recovered fairly quickly...

Using panel data for a large number of countries, we find that economic contractions are not followed by offsetting fast recoveries. Trend output lost is not regained, on average. Wars, crises, and other negative shocks lead to absolute divergence and lower long-run growth, whereas we find...

Although negative shocks have persistent effects on output on average, this paper shows that macroeconomic policies and the structure of the economy can influence the speed of recovery and mitigate the persistence of the shock. Indeed, monetary and fiscal stimulus and foreign aid can spur a...

This paper investigates whether Indonesia’s recent currency crisis was due to domestic fundamentals, common external shocks (“monsoons”), or contagion from neighboring countries. Markov-switching models attribute speculative pressure on Indonesia’s currency to domestic political and...

This paper analyzes the cyclical fluctuations in South Africa in a cross-country context, and studies the impact of the output gap by controlling for export intensity, the debt burden, asset prices, and banking crises. Results show that South Africa’s revenue performance was outstanding...

Did real overvaluation contribute to the 1991 currency crisis in India? This paper seeks an answer by constructing the equilibrium real exchange rate, using an error correction model and a technique developed by Gonzalo and Granger (1995). The results are affirmative and the evidence indicates...

Capital flight may undermine economic growth and the effectiveness of debt relief and foreign aid. This paper is the first attempt to test whether unsound macroeconomic policies or weak institutions lead to capital flight, using panel data for a large set of developing, emerging market and...

Recent developments have increased questions about vulnerabilities in Central and Eastern European Countries (CEE) that are experiencing credit booms. This paper analyzes the role of foreign-owned banks in these credit booms. The results show that the CEE countries depend on foreign banks, and...

The period following the 2000-01 crisis was marked by a successful disinflation program sustained through inflation targeting and fiscal discipline in Turkey. This paper studies the impact of monetary and fiscal policies on credit growth during this period. Using quarterly bank-level data...