English, Article, Journal or magazine article edition: Determining Underlying Macroeconomic Fundamentals during Emerging Market Crises: Are Conditions as Bad as they Seem? Mark Aguiar; Fernando Broner

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Bookmark: http://trove.nla.gov.au/version/153614
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Determining Underlying Macroeconomic Fundamentals during Emerging Market Crises: Are Conditions as Bad as they Seem?
Author
  • Mark Aguiar
  • Fernando Broner
Physical Description
  • preprint
Notes
  • Emerging market crises are characterized by large swings in both macroeconomic fundamentals and asset prices. The economic significance of observed movements in macroeconomic variables is obscured by the brief and extreme nature of crises. In this paper we propose to study the macroeconomic consequences of crises by studying the behavior of “effective” fundamentals, constructed by studying the relative movements of stock prices during crises. We find that these effective fundamentals provide a different picture than that implied by observed fundamentals. First, asset prices often reflect expectations of improvement in fundamentals after the initial devaluations; specifically, effective depreciations are positive but not as large as the observed ones. Second, crises vary in their effect on credit market conditions, with investors expecting tightening of credit in some cases (Mexico 1994, Philippines 1997), but loosening of credit in others (Sweden 1992, Korea 1997, Brazil 1999).
  • Currency crises; emerging markets; stock prices; overshooting; credit markets
  • RePEc:upf:upfgen:863
Language
  • English
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