Fluctuations in Emerging Economies: Regional and Global Factors

This paper sought to investigate the reasons why fluctuations are larger in emerging economies than developed economies. It finds that it is also the case that fluctuations differ from one region to the other. The central assumption that guided this paper’s argument is that imported and domestic shocks affect EMEs differently from their wealthier counterparts, and among themselves. The paper started with an exhaustive presentation of stylised facts common and specific to country groups. It was found that the literature’s reliance on one region group to describe EMEs provided a distorted view of the latter, and sought instead to provide a region-based compendium of stylised facts. The paper also offered some preliminary evidence as to the effects of imported shocks. Given the fact that the global and regional cycles are not observable variables per se, we offer an estimate of global and regional factors by means of a two-step non-parametric estimation. Its reliance on a minimal set of assumptions and constraints made sure the end result was not conditioned by prior data structure. It also proved to offer statistically robust estimates for both factors. The resulting data is then compared against the proposed model.