How have emerging economies been hit by the crisis?
The direction of this crisis’s contagion (from ‘core’ to ‘periphery’) stands in contrast to the 1997-1998 emerging market crises, which started in Asia, then spread to Russia, the Commonwealth of Independent States (CIS), and Brazil and finally hit some US financial institutions. The present crisis is closer to that of the Great Depression of the 1930s or the US dollar crisis in the 1970s. Emerging economies were therefore relatively late victims. They continued to grow through most of 2008 thanks in part to high commodity prices, until their crash in late summer of 2008. Ultimately, they were hit by the contraction in global demand and falling commodity prices, the global liquidity squeeze and the resulting capital outflows and increasing risk aversion, sometimes by troubles in parent financial institutions in developed countries, increased exchange rate volatility (including competitive depreciation of major trade partners and competitors), and decreasing demand for migrant labour. T
