Can Developing Countries Maintain Financial Stability after the Global Crisis? The Role of External Financial Shocks

  • Hasan Cömert Middle East Technical University, Turkey
  • Mehmet Selman Çolak Central Bank of the Republic of Turkey, Turkey

Abstract

The recent global turmoil severely affected some developing economies. However, in general, these nations survived the crisis with less damage compared with advanced countries. The majority of developing countries did not experience a financial system collapse. What were the main factors behind their relatively better performance? We argue that the main reason was the relatively moderate financial account shocks, in terms of both magnitude and duration, experienced by developing economies during the global crisis. This was due to the fact that advanced countries could not fully serve their roles as safe havens during the recent global turmoil. Furthermore, developing countries enjoyed greater autonomy and legitimacy in implementing expansionary monetary and fiscal policies in an environment in which international cooperation partially met the need for an international lender of last resort. If the returns in advanced countries become more attractive, developing countries may face larger external financial shocks in future crises.


Key words: Financial stability, Developing countries, Global crisis, Financial flows, Safe haven, Sudden stop.
JEL: E52, E58, F32, F31, G1.


Nedavni globalni nemiri snažno su pogodili neke ekonomije u razvoju. Međutim, uopšteno gledano, ove zemlje su preživele krizu sa manjom štetom u poređenju sa naprednim zemljama. Većina zemalja u razvoju nije doživela kolaps finansijskog sistema. Koji su bili glavni faktori iza njihovih relativno boljih performansi? Mi tvrdimo da su glavni razlozi bili relativno umereni šokovi finansijskih računa, u smislu veličine i trajanja, koje su iskusile ekonomije u razvoju tokom globalne krize. Ovo se desilo zbog činjenice što napredne zemlje nisu mogle u potpunosti služiti svoju ulogu kao sigurna utočišta tokom nedavnih globalnih nemira. Štaviše, zemlje u razvoju uživale su veću autonomiju i legitimitet u sprovođenju ekspanzivnih monetarnih i fiskalnih politika u okruženju u kojem je međunarodna saradnja delimično ispunila potrebu za međunarodnim sigurnim utočištem. Ako dobitak u naprednim zemljama postane privlačniji, zemlje u razvoju mogu se suočiti sa većim eksternim finansijskim šokovima u budućim krizama.


Ključne reči: finansijska stabilnost, zemlje u razvoju, globalna kriza, finansijski tokovi, sigurno utočište, iznenadni zastoj.

How to Cite
Cömert H., & Çolak M.S. (2018). Can Developing Countries Maintain Financial Stability after the Global Crisis? The Role of External Financial Shocks. Panoeconomicus, 65(2), 201-226. doi:10.2298/PAN150905028C
Section
Original scientific paper