Growth Accelerations and Reversals in Emerging Market and Developing Economies: The Role of External Conditions

Author/Editor:

Bertrand Gruss ; Malhar S Nabar ; Marcos Poplawski Ribeiro

Publication Date:

March 12, 2018

Electronic Access:

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Summary:

This paper investigates how country-specific external demand, external financial conditions, and terms of trade affect medium-term growth in Emerging Market and Developing Economies and the occurrence of growth accelerations and reversals. The importance of country-specific external conditions for medium-term growth has increased over time—in particular, the growing contribution of external financial conditions accounts for one-third of the increase in average income per capita growth between 1995–2004 and 2005–14. Stronger external demand and financial conditions significantly increase the probability of growth accelerations, while a strengthening of any of the three conditions significantly decreases the probability of reversals.