Three essays in emerging market post-crisis recovery

Financial crises in emerging market economies during the late 1990s were marked by sudden withdrawals of funds by foreign creditors, resulting in production declines. Although the affected countries all adopted similar policies, some countries recovered more smoothly than others. Why? The purpose of this series of essays is to explore the largely unexamined topic of varying recovery rates of crisis-affected economies by designing theoretical models that can be subjected to simulations.; The first essay examines whether pre-crisis macroeconomic fundamentals have an impact on the post-crisis recovery process. Comparing two crisis-affected economies we find that the pre-crisis difference in export sector strength between Argentina and Thailand provides significant explanation for the post-crisis difference in movements of macroeconomic variables between the two countries. The second essay explores links between the public and private sector that contribute to the recovery process. Under certain structural assumptions on the flexibility of the economy, the interactions between the public and private sectors can act to rapidly improve the economic situation. The third essay examines the role of disciplinary fiscal policy in recovery from financial crisis. The International Monetary Fund strongly favored positive signals to potential foreign creditors and prescribed disciplinary fiscal policy during the height of crisis-driven downturns, thereby countering the standard Keynesian prescription of expansionary fiscal stimulus to lead the recovery process. Applying the framework developed in the second essay, the policy conundrum is resolved: we find that disciplinary fiscal policy can enhance (worsen) the recovery process of economies where there is some (less) flexibility in production.