External Vulnerability in Emerging Market Economies: How High Liquidity Can Offset Weak Fundamentals and the Effects of Contagion

41 Pages Posted: 9 May 2000

See all articles by Matthieu Bussière

Matthieu Bussière

Banque de France

Christian Mulder

International Monetary Fund (IMF) - Policy Development and Review Department

Date Written: July 1999

Abstract

This paper investigates the factors behind the 1994 and 1997 crises and whether these can explain the 1998 crisis. The study reveals that: (i) variables used in an Early Warning System model developed by IMF staff scored well in predicting the 1998 crisis out-of-sample; (ii) all three crisis episodes can be well explained by a parsimonious set of core fundamentals and liquidity related variables; and (iii) the presence of an IMF-supported program significantly reduced the depth of crises.

JEL Classification: F31, F47

Suggested Citation

Bussiere, Matthieu and Mulder, Christian, External Vulnerability in Emerging Market Economies: How High Liquidity Can Offset Weak Fundamentals and the Effects of Contagion (July 1999). IMF Working Paper No. 99/88, Available at SSRN: https://ssrn.com/abstract=217072 or http://dx.doi.org/10.2139/ssrn.217072

Matthieu Bussiere (Contact Author)

Banque de France ( email )

Paris
France

Christian Mulder

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States

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