This paper studies how financial stress, defined as periods of impaired financial intermediation, is transmitted from advanced to emerging economies using a new financial stress index for emerging economies. Previous financial crises in advanced economies passed through strongly and rapidly to emerging economies. The unprecedented spike in financial stress in advanced economies elevated stress across emerging economies above levels seen during the Asian crisis but with significant cross-country variation. The extent of pass-through of financial stress is related to the depth of financial linkages between advanced and emerging economies. Higher current account and fiscal balances do little to insulate emerging economies from the transmission of acute financial stress in advanced economies, although they may still help dampen the impact on the real economy.

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This paper assesses how pro-poor and inclusive Asia's recent growth has been, and what factors have been driving these outcomes. It finds that while poverty has fallen across the region over the last two decades, inequality has increased, dampening the impact of growth on poverty reduction. As a result, relative to other emerging and developing regions and to Asia's own past, the recent period of growth has been both less inclusive and less pro-poor. Our analysis suggests a number of policies that could help redress these trends and broaden the benefits of growth in Asia. These include fiscal policies to increase spending on health, education, and social safetynets; labor market reforms to boost the labor share of total income; and reforms to make financial systems more inclusive.

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.This paper investigates the medium-term behavior of output following banking crises, and its association with pre-and post-cr isis conditions and policies. W e find that output tends to be depressed substantially follo wing banking crises, with no rebound to the precrisis trend. However, growth does eventually te nd to return to its pre crisis rate, with substantia l crosscountry variation in outcomes. The depressed path of output typically results from reductions of roughly equal proportions in the em ployment rate, the capital-to-labor ratio, and total factor produ ctivity. Initial cond itions that are strongly as sociated with m edium-run outpu t losses include the short-run change in output, the occurrence of a joint banking-and-currency crisis, and a high precrisis level of investm ent. Short-run fiscal and m onetary stim ulus is associated with smaller medium-run deviations of output and growth from the precrisis trend.