Another paper on the crisis requires some justification. The justification for this one
is that the lessons of the crisis for emerging markets and their management of
openness are still not adequately understood. Important questions remain unanswered.
This paper focuses on three.
First, who was hit, and why? And, relatedly, what policies should emerging markets
follow to maximize the likelihood of being in the camp less affected by global
volatility? While more than a little has been written on this subject, it is not clear that
consensus answers yet exist.
Second, what explains the outsized response of trade that was one of the principal
transmission belts for the crisis? This may have been just another “sudden stop” of
capital flows, not unlike the sudden stops of the past, but it was the first modern
sudden stop of trade flows, something that deserves further analysis.
Third and finally, what was the role of global imbalances in the crisis? The answer
to this last question again has implications for what kind of policy adjustments
emerging markets should make going forward.
1. Who was Hit and Why? 1
2. Policy Responses: The Unanswered Questions 5
3. Why Was the Collapse of Trade so Dramatic? 7
4. The Role of Global Imbalances 13
5. Managing Openness 17
6. In Sum 20