TY  - JOUR
AU  - Calvo,Guillermo A.
AU  - Izquierdo,Alejandro
AU  - Talvi,Ernesto
TI  - Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crises
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12101
PY  - 2006
Y2  - March 2006
UR  - http://www.nber.org/papers/w12101
L1  - http://www.nber.org/papers/w12101.pdf
N1  - Author contact info:
Guillermo A. Calvo
Columbia University
School of International and Public Affairs
420 West 118th St, Room 1303B
MC3332
New York, NY 10027
Tel: 212/854-4264
E-Mail: gc2286@columbia.edu

Alejandro Izquierdo
Inter-American Development Bank
1300 New York Ave, N. W.
Washington, D. C., 20577
E-Mail: alejandroi@iadb.org

Ernesto Talvi
M2  - featured in NBER digest on 2006-03-20
AB  - Using a sample of emerging markets that are integrated into global bond markets, we analyze the
collapse and recovery phase of output collapses that coincide with systemic sudden stops, defined as periods of skyrocketing aggregate bond spreads and large capital flow reversals. Our findings indicate the presence of a very similar pattern across different episodes: output recovers with virtually no recovery in either domestic or foreign credit, a phenomenon that we call Phoenix Miracle, where output %u201Crises from its ashes%u201D, suggesting that firms go through a process of financial engineering to restore liquidity outside the formal credit markets. Moreover, we show that the US Great Depression could be catalogued as a Phoenix Miracle. However, in contrast to the US Great Depression, EM output collapses occur in a context of accelerating price inflation and falling real wages, casting doubts on price deflation and nominal wage rigidity as key elements in explaining output collapse, and suggesting that financial factors are prominent for understanding these collapses.
ER  -