Evaluating vulnerability divergence between Advanced Economies and EMDEs in response to external shocks

Résumé

This study examines the heterogeneous effects of external shocks, specifically oil price fluctuations, global demand shifts, and U.S. monetary policy adjustments, on economic growth in advanced economies (AEs) and emerging market and developing economies (EMDEs). Using a Generalized Method of Moments (GMM) framework on panel data from 2003 to 2023, we uncover significant disparities in economic resilience and transmission mechanisms between these country groups. Our findings reveal that EMDEs exhibit heightened sensitivity to U.S. monetary policy (significant at 5%), reinforcing the 'global financial cycle' hypothesis, while AEs show significant responses to oil price shocks, likely due to structural advancements in energy efficiency. Surprisingly, nominal exchange rate fluctuations (NEER) show no statistically significant impact on GDP growth in either group, challenging conventional transmission theories. These results underscore the need for differentiated macroeconomic stabilization policies: EMDEs require enhanced financial shock absorbers, whereas AEs should prioritize energy efficiency and international monetary cooperation to mitigate spillover effects. By integrating multiple shock channels within a unified analytical framework, this study advances the literature on global macroeconomic dynamics and provides actionable insights for policymakers navigating persistent volatility in energy and financial markets.