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The global financial crisis and development thinking

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  • Rogers, F. Halsey

Abstract

The global financial crisis has not only dealt a major blow to the global economy, but also shaken confidence in economic management in the developed world and the economic models that guide it. The crisis has revealed major market failures, especially in the housing bubble and its transmission to the financial system, but also glaring state failures that propagated and exacerbated the crisis. Will the events of the past two years lead to major shifts in thinking about development economics, and should they? This paper assesses that question for several key domains of development thinking, including the market-state balance, macroeconomic management, globalization, development financing, and public spending. On the one hand, changed global circumstances and new awareness of vulnerability should lead to some policy changes, as developing countries take steps to reduce and buffer risks, including risks generated in developed countries. At the same time, the crisis should largely reinforce the Post-Washington Consensus on development that has emerged over the past decade -- a world view that aims to achieve private sector-driven growth but sees a facilitating role for the state, promotes engaging with the global economy in ways that advance development, and values pragmatism, experimentation, and evidence-based policymaking over ideology.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5353.

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Date of creation: 01 Jun 2010
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Handle: RePEc:wbk:wbrwps:5353

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Keywords: Debt Markets; Economic Theory&Research; Banks&Banking Reform; Climate Change Economics; Emerging Markets;

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  1. Asli Demirgüç-Kunt & Luis Servén, 2010. "Are All the Sacred Cows Dead? Implications of the Financial Crisis for Macro- and Financial Policies," World Bank Research Observer, World Bank Group, vol. 25(1), pages 91-124, February.
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Cited by:
  1. Lin, Justin Yifu & Rosenblatt, David, 2012. "Shifting patterns of economic growth and rethinking development," Policy Research Working Paper Series 6040, The World Bank.

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