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Structural policies for shock-prone developing countries

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  • Collier, Paul
  • Goderis, Benedikt

Abstract

Developing countries frequently face large adverse shocks to their economies. We study two distinct types of such shocks: large declines in the price of a country’s commodity exports and severe natural disasters. Unsurprisingly, adverse shocks reduce the short-term growth of constant-price GDP and we analyse which structural policies help to minimize these losses. Structural policies are incentives and regulations that are maintained for long periods, contrasting with policy responses to shocks, the analysis of which has dominated the literature. We show that some previously neglected structural policies have large effects that are specific to particular types of shock. In particular, regulations which reduce the speed of firm exit substantially increase the short-term growth loss from adverse non-agricultural export price shocks and so are particularly ill-suited to mineral exporting economies. Natural disasters appear to be better accommodated by labour market policies, perhaps because such shocks directly dislocate the population.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17311.

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Date of creation: 03 Apr 2009
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Handle: RePEc:pra:mprapa:17311

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Keywords: commodity price shocks; natural disasters; growth; policies;

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References

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  1. Paul Collier & Benedikt Goderis, 2007. "Does Aid Mitigate External Shocks?," Economics Series Working Papers WPS/2007-18, University of Oxford, Department of Economics.
  2. Raddatz, Claudio, 2007. "Are external shocks responsible for the instability of output in low-income countries?," Journal of Development Economics, Elsevier, vol. 84(1), pages 155-187, September.
  3. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
  4. Collier, Paul & Goderis, Benedikt, 2008. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," MPRA Paper 17315, University Library of Munich, Germany.
  5. Witold J. Henisz, 2002. "The institutional environment for infrastructure investment," Industrial and Corporate Change, Oxford University Press, vol. 11(2), pages 355-389.
  6. Collier, Paul & Goderis, Benedikt, 2009. "Structural policies for shock-prone developing countries," MPRA Paper 17311, University Library of Munich, Germany.
  7. Dehn, Jan, 2000. "Commodity price uncertainty in developing countries," Policy Research Working Paper Series 2426, The World Bank.
  8. Davin Chor & Richard B. Freeman, 2005. "The 2004 Global Labor Survey: Workplace Institutions and Practices Around the World," NBER Working Papers 11598, National Bureau of Economic Research, Inc.
  9. Loayza, Norman V. & Raddatz, Claudio, 2006. "The structural determinants of external vulnerability," Policy Research Working Paper Series 4089, The World Bank.
  10. Broda, Christian, 2004. "Terms of trade and exchange rate regimes in developing countries," Journal of International Economics, Elsevier, vol. 63(1), pages 31-58, May.
  11. Jan Dehn, 2000. "Commodity Price Uncertainty in Developing Countries," Economics Series Working Papers WPS/2000-12, University of Oxford, Department of Economics.
  12. Jan Dehn, 2000. "Commodity price uncertainty in developing countries," CSAE Working Paper Series 2000-12, Centre for the Study of African Economies, University of Oxford.
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Cited by:
  1. Mary Hallward-Driemeier & Bob Rijkers, 2013. "Do Crises Catalyze Creative Destruction? Firm-level Evidence from Indonesia," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1788-1810, December.
  2. Chris Papageorgiou & Andrew Berg & Catherine A. Pattillo & Nicola Spatafora, 2010. "The End of An Era? the Medium- and Long-Term Effects of the Global Crisison Growth in Low-Income Countries," IMF Working Papers 10/205, International Monetary Fund.
  3. Gheorghe Săvoiu & Vasile Dinu & Laurenţiu Tăchiciu, 2012. "Romania Foreign Trade in Global Recession, Revealed by the Extended Method of Exchange Rate Indicators," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 14(31), pages 173-194, February.
  4. Chris Papageorgiou & Hans Weisfeld & Catherine A. Pattillo & Martin Schindler & Nicola Spatafora & Andrew Berg, 2011. "Global Shocks and their Impacton Low-Income Countries," IMF Working Papers 11/27, International Monetary Fund.
  5. Ibrahim Ahmed Elbadawi & Raimundo Soto, 2012. "Resource Rents, Political Institutions and Economic Growth," Documentos de Trabajo 413, Instituto de Economia. Pontificia Universidad Católica de Chile..
  6. Henderson, J. Vernon & Roberts, Mark & Storeygard, Adam, 2013. "Is urbanization in Sub-Saharan Africa different ?," Policy Research Working Paper Series 6481, The World Bank.
  7. Paul Collier & Benedikt Goderis, 2009. "Structural Policies for Shock-Prone Developing Countries," Economics Series Working Papers CSAE WPS/2009-03, University of Oxford, Department of Economics.
  8. Loayza, Norman, 2011. "Volatilidad y crisis: Tres lecciones para países en desarrollo," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 22, pages 9-20.
  9. Era Dabla-Norris & Yasemin Bal-Gunduz, 2012. "Exogenous Shocks and Growth Crises in Low-Income Countries," IMF Working Papers 12/264, International Monetary Fund.
  10. Freund, Caroline & Rijkers, Bob, 2014. "Episodes of unemployment reduction in rich, middle-income, and transition economies," Policy Research Working Paper Series 6891, The World Bank.

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