Phoenix miracles in emerging markets
Subtitle: recovering without credit from systemic financial crises
By: by Guillermo A. Calvo, Alejandro Izquierdo and Ernesto Talvi
Contributors: Izquierdo, Alejandro, 1964-; Talvi, Ernesto; Bank for International Settlements. Monetary and Economic Department
Series: BIS working papers -- no. 221
Publisher: Bank for International Settlements
Published: 2006
Place of publication: Basel, Switzerland
Language: eng
Format: [electronic resource] :
Description: Using a sample of emerging markets that are integrated into global bond markets, we analyse the collapse and recovery phase of output collapses that coincide with systemic sudden stops, defined as periods of skyrocketing aggregate bond spreads and large capital flow reversals. Our findings indicate the presence of a very similar pattern across different episodes: output recovers with virtually no recovery in either domestic or foreign credit, a phenomenon that we call Phoenix Miracle, where output "rises from its ashes", suggesting that firms go through a process of financial engineering to restore liquidity outside the formal credit markets. Moreover, we show that the US Great Depression could be catalogued as a Phoenix Miracle. However, in contrast to the US Great Depression, EM output collapses occur in a context of accelerating price inflation and falling real wages, casting doubts on price deflation and nominal wage rigidity as key elements in explaining output collapse, and suggesting that financial factors are prominent for understanding these collapses.
Notes: Title from PDF file (viewed on Jan. 4, 2007).

"Monetary and Economic Department."

"December 2006."

Includes bibliographical references.

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