Does it matter for developing countries that the epicenter of the financial crisis is in the developed world?: Initial steps toward a model of the current financial crisis' effect on developing economies

Abstract: This paper takes initial steps of developing Wim Naudé’s discussion paper The Financial Crisis of 2008 and the Developing Countries into a more formalized, applicable model, with the purpose of analyzing whether it has potential of further development. This is done through four steps: 1) identifying relevant scientific theory, 2) defining a model based on Naudé’s paper, 3) applying it to a developing country, and 4) redefining the model and discussing remaining criticisms. The model illustrates effects of the financial crisis on developing countries through an interplay between transfer and cushion mechanisms. The model is concluded to be worth developing further, as it potentially can be developed to a formal model. However, there are many potential problems with its applicability, and further studies are necessary.