Why did China, India and Brazil all emerge so much more rapidly from the global financial crisis than advanced economies did? In a presentation in Denver to the National Association for Business Economics, Nobel Prize-winning economist Michael Spence, now of New York University, offered several reasons:
- These economies learned bitter lessons in the 1997-98 crisis that afflicted them more than advanced economies.
- They were in “a good initial position” with relatively low leverage, and thus didn’t get hit with the severe “balance sheet recession” that hit the U.S.
- They hadn’t any complex securitized financial instruments.
- They had built up large foreign-exchange reserves.
- Their central banks responded, much as advanced countries’ central banks did, with speed and agility to the credit tightening.
- Their economic managers displayed “a high degree of competence.”