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When to hit the panic button? Impact of currency crisis on consumer behaviors (RV of 2008/52/EPS/MKT)

Author: Dutt, Pushan ; Padmanabhan, V.INSEAD Area: Economics and Political Science ; Marketing Series: Working Paper ; 2009/02/EPS/MKT Publisher: Fontainebleau : INSEAD, 2009.Language: EnglishDescription: 51 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: The promise of emerging and developing economies has created unprecedented interest from businesses in recent times. Yet the reality of these economies are levels of volatility unheard of in developed markets. For example, there have been 348 currency crises across 164 countries in the past 40 years of which 95% have been in developing economies. Managers acknowledge that the impact of a crisis on their business can far exceed those of competitive interactions. Yet there is little by way of frameworks and guidelines to help them grapple with the implications of such events. In this research we attempt to develop a better understanding of (i) the determinants of an economic crisis, (ii) the impact of a crisis on economic and business indicators such as consumer and retail expenditures and product category sales, and (iii) the recovery process of these parameters subsequent to the crisis. A series of robustness tests reinforces the key findings on the impact of a crisis on business indicators and their recovery post crisis. While managers have little ability to influence the likelihood of a crisis, we believe that this work, by establishing a set of stylized facts about the phenomenon, can help them become proactive in managing such an event and thereby potentially turn an adverse event into a marketing opportunity. Previous title: When to hit the panic button? Impact of currency crisis on consumer behaviors - Pushan, Dutt;Padmanabhan, V. - 2008 - INSEAD Working Paper
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The promise of emerging and developing economies has created unprecedented interest from businesses in recent times. Yet the reality of these economies are levels of volatility unheard of in developed markets. For example, there have been 348 currency crises across 164 countries in the past 40 years of which 95% have been in developing economies. Managers acknowledge that the impact of a crisis on their business can far exceed those of competitive interactions. Yet there is little by way of frameworks and guidelines to help them grapple with the implications of such events. In this research we attempt to develop a better understanding of (i) the determinants of an economic crisis, (ii) the impact of a crisis on economic and business indicators such as
consumer and retail expenditures and product category sales, and (iii) the recovery process of these parameters subsequent to the crisis. A series of robustness tests reinforces the key findings on the impact of a crisis on business indicators and their recovery post crisis. While managers have little ability to influence the likelihood of a crisis, we believe that this work, by establishing a set of stylized facts about the phenomenon, can help them become proactive in managing such an event and thereby potentially turn an adverse event into a marketing opportunity.

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