Asian Development Bank
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NBER Working Papers and Publications
|June 2017||Flexibility of Adjustment to Shocks: Economic Growth and Volatility of Middle-Income Countries Before and After the Global Financial Crisis of 2008|
with Joshua Aizenman, Yothin Jinjarak, Gemma Estrada: w23467
The pronounced and persistent impact of the global financial crisis of 2008 motivates our empirical analysis of the role of institutions and macroeconomic fundamentals on countries’ adjustment to shocks. Our empirical analysis shows that the associations of growth level, growth volatility, shocks, institutions, and macroeconomic fundamentals have changed in important ways after the crisis. GDP growth across countries has become more dependent on external factors, including global growth, global oil prices, and global financial volatility. After accounting for the effects global shocks, we find that several factors facilitate adjustment to shocks in middle income countries. Education attainment, share of manufacturing output in GDP, and exchange rate stability increase the level of economic...