The natural question here is: what was the ingredient that led the financial events of midSeptember of last year to end up the way they did? The developed world entered a severe recession, and output dropped simultaneously in most countries. The crisis spread around the world like a virus, with unprecedented and, of course, unforeseen strength and speed, making no distinctions among economies’ strengths or weaknesses (Figure 1). What happened? Why was there no differentiation? How could such massive contagion occur? Why the synchrony? All of these are very important questions in understanding how the crisis was transmitted and how we will make it through. If there is one thing that is difficult to explain it is the intensity of its impact. In Chile, neither the path that the domestic economic cycle was experiencing nor the analysis of traditional transmission channels for an external crisis – that is, financial and commercial channels – are capable of fully explaining what happened (De Gregorio, 2009). The hypothesis that seems to have most ground at the moment is that a deterioration in global confidence, understood as a worsening of expectations and increased uncertainty around the world, has amplified the response to the initial impact, pushing us into a more acute and synchronized crisis than we could envision at first. It helps to study the historical relationships among the data if cycles and patterns tend to repeat themselves on a regular basis.
Figure 14  Change in growth projections for 2009 and 2010 (month-on-month variation of median projection, percentage points) 2009  2010  0.5  0.5  0.5  0.5  0.0  0.0  0.0  0.0  -0.5  -0.5 -0.5  -0.5  -1.0  -1.0 -1.0  -1.0  -1.5  -1.5 -1.5  -1.5  -2.0  -2.0 -2.0  -2.0  -2.5  Feb.08  Jul.08  Dec.08  -2.5 -2.5  May.09  Feb.09  Mar.09  Apr.09  -2.5  May.09  United States  Japan  Eurozone  Latin America  Chile  Mexico  Brazil  Eastern Europe  Source: Consensus Forecasts. 14  BIS Review 76/2009