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The Cross-Country Incidence of the Global Crisis

Philip R. Lane
IIIS, Trinity College Dublin and CEPR

Gian Maria Milesi-Ferretti
International Monetary Fund, Research Department and CEPR

IIIS Discussion Paper No. 333

Abstract

We examine whether the cross-country incidence and severity of the 2008-2009 global recession is systematically related to pre-crisis macroeconomic and financial factors. We find that the pre-crisis level of development, increases in the ratio of private credit to GDP, current account deficits, and openness to trade are helpful in understanding the intensity of the crisis. International risk sharing did little to shield domestic demand from the countryspecific component of output declines, while those countries with large pre-crisis current account deficits saw domestic demand fall by much more than domestic output during the crisis.


Keywords: financial crisis, current account, private credit, international financial integration.
JEL Classification: F31, F32, F43

 


Last updated 28 August 2014 by IIIS (Email).