Chapter 4 of the IMF's World Economic Outlook focuses on financial stress, and how that stress "fuels the fire" and helps spread the effects of global recessions.  According to the authors, global crises have a history of bringing about "reduced capital inflows--often abruptly through sudden stops."  This brings lower growth and makes recovery long and slow.  And in a global economic crisis, everyone feels the pain as the financial stress is passed from advanced economies to emerging economies.  

The authors explain their Financial Stress Index in a post at the VoxEU blog.  They say that global financial stress, according to the index, hit a record high at the end of 2008, and that bank lending seems to be the key variable:

Our study finds that stress in emerging economies typically increases almost one-for-one with stress in advanced economies. This result is based on a two-stage estimation process (Forbes and Chinn 2004) using monthly data and a panel data analysis using annual data. Transmission is rapid and occurs within one or two months after advanced economies are in financial stress.

That said, there has clearly been regional variation during the current crisis. Emerging Europe was hit especially hard, while economies in Latin America weathered the first wave of stress fairly well. This variation is mainly accounted for by the strength of financial linkages with advanced economies. Countries with higher foreign liabilities – measured by bank lending, portfolio investments, and FDI as a percentage of destination country GDP – experienced stronger transmission.

The twist in the current crisis is that bank-lending linkages appear to be the main driver, rather than the more mobile portfolio investment links that drove the Asian crisis. Since the mid-1990s, Western European banks have dominated bank-lending flows. Emerging Europe stands out as the largest recipient (Figure 2). Using an econometric model for stress transmission, we find that an increase in bank liabilities to Western Europe from 15% to 50% of GDP (roughly the difference between Emerging Europe and other emerging regions) doubles the strength of stress transmission. It is no surprise therefore that Emerging Europe was the first emerging market region to be hit hard by the crisis.

Read Chapter 4 of the World Economic Outlook here, and the authors' VoxEU post here.