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Financial Crises, Poverty, and Income Distribution

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  • International Monetary Fund

Abstract

Developing and transition economies are prone to financial crises, including balance of payments and banking crises. These crises affect poverty and the distribution of income through a variety of channels: slowdowns in economic activity, relative price changes, and fiscal retrenchment, among others. This paper deals with the impact of financial crises on the incidence of poverty and income distribution, and discusses policy options that can be considered by governments in the aftermath of crises. Empirical evidence, based on both macro- and microlevel data, shows that financial crises are associated with an increase in poverty and, in some cases, income inequality. The provison of targeted safety nets and the protection of specific social programs from fiscal retrenchment remain the main short-term propoor policy responses to financial crises.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/4.

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Length: 47
Date of creation: 01 Jan 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/4

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Keywords: Poverty; Income distribution; financial crises; financial crisis; poverty line; incidence of poverty; crisis episodes; household income; crisis episode; national accounts; banking crises; distribution of income; country evidence; household size; household survey; social safety net; currency crises; household consumption; social safety nets; household surveys; household survey data; changes in poverty; currency crisis; speculative attacks; household members; economic crisis; macroeconomic policies; recessions; reform programs; recession; crisis countries; living standards; financial crisis literature; multivariate analysis; currency depreciation; income data; household groups; financial distress; cash transfers; income distribution data; household welfare; household data; asian financial crisis; information on income distribution; market banking crises; data sets; country regressions; benefit incidence; estimates of income; impact of recessions; depth analysis; information on poverty; demand for services; analysis of poverty; fiscal policy;

References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 97/79, International Monetary Fund.
  2. Barry Eichengreen & Andrew K. Rose, 1998. "Staying Afloat When the Wind Shifts: External Factors and Emerging-Market Banking Crises," NBER Working Papers 6370, National Bureau of Economic Research, Inc.
  3. Cesar Patricio Bouillon & Arianna Legovini & Nora Lustig, 2003. "Rising Inequality in Mexico: Household Characteristics and Regional Effects," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 112-133.
  4. Ravallion, Martin & Shaohua Chen, 1996. "What can new survey data tell us about recent changes in distribution and poverty?," Policy Research Working Paper Series 1694, The World Bank.
  5. James E. Foster & Miguel Székely, 2008. "Is Economic Growth Good For The Poor? Tracking Low Incomes Using General Means," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1143-1172, November.
  6. Ravallion, Martin, 2000. "Are the poor protected from budget cuts? theory and evidence for Argentina," Policy Research Working Paper Series 2391, The World Bank.
  7. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
  8. Milesi-Ferretti, G-M & Razin, A, 1996. "Current-Account Sustainability," Princeton Studies in International Economics 81, International Economics Section, Departement of Economics Princeton University,.
  9. Nancy P. Marion & Robert P. Flood, 1997. "Policy Implications of "Second-Generation" Crisis Models," IMF Working Papers 97/16, International Monetary Fund.
  10. Milesi-Ferretti, Gian Maria & Razin, Assaf, 1996. "Current Account Sustainability: Selected East Asian and Latin American Experiences," CEPR Discussion Papers 1509, C.E.P.R. Discussion Papers.
  11. Maddala,G. S., 1986. "Limited-Dependent and Qualitative Variables in Econometrics," Cambridge Books, Cambridge University Press, number 9780521338257, October.
  12. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-31, March.
  13. Frankel, Jeffrey A & Rose, Andrew K, 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," CEPR Discussion Papers 1349, C.E.P.R. Discussion Papers.
  14. Lanjouw, Peter & Ravallion, Martin, 1999. "Benefit Incidence, Public Spending Reforms, and the Timing of Program Capture," World Bank Economic Review, World Bank Group, vol. 13(2), pages 257-73, May.
  15. Datt, Gaurav & Ravallion, Martin, 1998. "Why Have Some Indian States Done Better Than Others at Reducing Rural Poverty?," Economica, London School of Economics and Political Science, vol. 65(257), pages 17-38, February.
  16. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  17. Ferreira, Francisco & Prennushi, Giovanna & Ravallion, Martin, 1999. "Protecting the poor from macroeconomic shocks," Policy Research Working Paper Series 2160, The World Bank.
  18. James E. Foster & Miguel Székely, 2001. "Is Economic Growth Good for the Poor?: Tracking Low Incomes Using General Means," IDB Publications 6486, Inter-American Development Bank.
  19. Blejer, Mario I & Guerrero, Isabel, 1990. "The Impact of Macroeconomic Policies on Income Distribution: An Empirical Study of the Philippines," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 414-23, August.
  20. Robert P. Flood & Nancy P. Marion, 1997. "Policy Implications of "Second-Generation" Crisis Models," IMF Staff Papers, Palgrave Macmillan, vol. 44(3), pages 383-390, September.
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