Emerging Economy Responses to the Global Financial Crisis of 2007-20+L427209: An Empirical Analysis of the Liquidity Easing Measures

Abstract

This paper draws on a unique data set on the nontraditional systemicliquidity easing measures recently undertaken by many emerging marketeconomies. It offers an empirical analysis of the key determinantsaffecting the decision to undertake these measures over the periodSeptember 2008-March 2009. The paper finds that economy size, accessto international credit markets, CDS spreads, currency depreciation,and current account balances are among the key factors influencingthe adoption of these measures. It provides a rationale for the differencesin central bank policy responses, which reflect differences in economicstructures rather than conflicting views on fundamental principles.The paper also provides a preliminary assessment of the effectivenessof these measures and points out that despite their positive impacts,they have not fully shielded the real economy from the recent financialmeltdown.