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Regular version of the site

Working paper

Is this time different? Reflections on recent emerging-market turbulence

Bruegel blog. Bruegel blog. Bruegel, 2018
Symptoms of currency crisis in Argentina and Turkey in August and September 2018 raised again the question over which factors determine macroeconomic and financial stability in emerging-market economies. As with previous crisis episodes in 1980s and 1990s, prudent domestic policies play the key role. Monetary and fiscal laxity, as well as structural and institutional distortions, are the main crisis causes even if external shock/contagion often serves as a trigger. Early policy correction can help in preventing a crisis and avoid its economic, social and political costs. If crisis cannot be avoided the comprehensive anti-crisis package, including up-front monetary and fiscal adjustment should be adopted as quickly as possible to arrest market panics and reverse negative expectations.