Adaptation Mechanisms of Developing Economies in the Face of Global Economic Crises

The international economy is insecure in commission, financial stability, and growth, crisis after crisis befall developing economies, and of course, unbalanced development. Such crises reveal weaknesses in fiscal strength and external position, as well as in institutional capacity, which require closely tailored responses. Although we have been studying crisis transmission mechanisms and their ripple effects, or the ripple effects policy responses also, there is very little work that looks at the co-evolution of macroeconomic processes, structural processes, and institutional processes over time in a single framework in the context of developing economies. Existing research is mostly crisis- or place-specific failing to address the evolution of long-term adaptation. There is little research on how policy bundles and structural characteristics interact over time, particularly during several global economic crises. Yet, this gap restricts the global comprehension of adaptation capacities in developing economies and long-term effectiveness of response approaches. This study seeks to address this gap through a mixed-methods strategy exploring both quantitative and qualitative data regarding the adaptation mechanisms of developing economies during the global shocks that the COVID-19 pandemic and the Global Financial Crisis represent. The research shows that crisis-prone economies are ones that depend on remittance inflows, or commodity exports often economies with little capital stock, even less human capital, but generally poor natives. Economies that implemented early fiscal measures, improved economic diversification and social protection were more successful in income stabilization and social vulnerability reduction. This work adds to the literature by combining macro and institutional viewpoints and promoting policy consistency, structural adjustments, and institutional capacity for sustainability. The paper suggests that policymakers confront the tensions between stimulus and austerity, long-term growth and stability, and identify the underpinnings of effective crisis-response systems by implementing economic, structural and institutional reforms simultaneously to enhance the adaptive capacity of developing economies in future crises.