(DP 2026-10) Detecting stagflationary stress in emerging economies

Abstract

I compare two ways to date stagflationary stress in 139 emerging market and developing economies over 1980–2023. The capped floor preserves high-inflation contractions and adds positive-growth years with growth below 3 percent and more than two percentage points below trend. The fixed rule  requires growth below 2 percent. With inflation above 5 percent, the rules share 661 country-years and 95 multi-year spells with identical dates. The capped floor alone identifies 57 country-years and the fixed rule alone identifies 184. With inflation above 8 percent, the corresponding disagreement counts are 38 and 135. The adjusted employment-growth difference between the two exclusive groups is 0.06 percentage point. The chronology shows how benchmark choice changes episode dates across growth regimes, with limited evidence that either rule detects greater employment distress.

JEL codes: E31, E32, F41, O11, O54