Time to produce and emerging market crises

•Investigates emerging market crises.•Output falls most in industries with high inventory/cost ratios.•Difference in output persists years into the recovery.•Results compatible with shock to cost of foreign capital, not to TFP.•Cross-industry data implies substantial impact on aggregate output.

After emerging market crises, value added falls more in manufacturing industries that normally exhibit higher inventory/cost ratios. Moreover, the difference in value added between manufacturing industries with different inventory/cost ratios persists years into the recovery. A shock to aggregate TFP cannot by itself match this pattern. In contrast, a persistent increase in the cost of foreign capital can. In the context of a calibrated multisector small open economy model, a shock to the cost of foreign capital consistent with the cross-industry data leads, 3–5 years after the onset of the crisis, to an average reduction of output relative to a trend of 5.4 percent.