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Crises and the Poor: Socially Responsible Macroeconomics

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  • Nora Lustig

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Abstract

Macroeconomic crises not only affect the current living standards of the poor, but their ability to grow out of poverty. This paper presents evidence on the impact of economic crisis on poverty and inequality in Latin America. Crises not only result in higher poverty rates but may cause irreversible damage to the human capital of the poor. In light of this evidence, the author concludes that crisis avoidance and a propoor response to crisis should be a major component of a poverty reduction strategy. Therefore, the role of exchange rate policy, capital controls and counter-cyclical fiscal policy in generating or avoiding crisis analyzed. Responses to macroeconomic crisis are assessed by considering the effects of different policy combinations, the use of safety nets and the composition of fiscal adjustment to protect the income of the poor in the face of macroeconomic adjustment. The main lesson is that socially responsible macroeconomic policy can protect the poor during times of crisis and simultaneously contribute to lower chronic poverty.

Suggested Citation

  • Nora Lustig, 2000. "Crises and the Poor: Socially Responsible Macroeconomics," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Fall 2000), pages 1-30, August.
  • Handle: RePEc:col:000425:008710
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    References listed on IDEAS

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    1. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
    2. Roberto Rigobon, 1999. "On the Measurement of the International Propagation of Shocks," NBER Working Papers 7354, National Bureau of Economic Research, Inc.
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    4. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
    5. Roberto Rigobon, 2000. "Identification through Heteroskedasticity: Measuring "Contagion: betweenArgentinean and Mexican Sovereign Bonds," NBER Working Papers 7493, National Bureau of Economic Research, Inc.
    6. Edison, Hali & Reinhart, Carmen M., 2001. "Stopping hot money," Journal of Development Economics, Elsevier, vol. 66(2), pages 533-553, December.
    7. Graciela L. Kaminsky & Carmen Reinhart, 2003. "The Center and the Periphery: The Globalization of Financial Turmoil," NBER Working Papers 9479, National Bureau of Economic Research, Inc.
    8. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel & Tille, Cedric, 2000. "Competitive devaluations: toward a welfare-based approach," Journal of International Economics, Elsevier, vol. 51(1), pages 217-241, June.
    9. Kristin Forbes, 2000. "The Asian Flu and Russian Virus: Firm-level Evidence on How Crises are Transmitted Internationally," NBER Working Papers 7807, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Miguel Braun & Luciano Di Gresia, 2003. "Towards Effective Social Insurance in Latin America: The Importance of Countercyclical Fiscal Policy," IDB Publications (Working Papers) 1463, Inter-American Development Bank.
    2. José Antonio Ocampo, 2003. "Developing countries' anti-cyclical policies in a globalized world," Chapters,in: Development Economics and Structuralist Macroeconomics, chapter 19 Edward Elgar Publishing.
    3. Gaviria Alejandro, 2002. "Household Responses to Adverse Income Shocks in Latin America," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, March.
    4. Mariano Tommasi & Silvana Tenreyro, 2001. "Comments on Dani Rodrik's "Why Is There So Much Economic Insecurity in Latin America?"," Working Papers 28, Universidad de San Andres, Departamento de Economia, revised Mar 2001.
    5. José Antonio Ocampo, 2003. "Developing countries' anti-cyclical policies in a globalized world," Chapters,in: Development Economics and Structuralist Macroeconomics, chapter 19 Edward Elgar Publishing.
    6. Stephen Shisanya & Paramu Mafongoya, 2016. "Adaptation to climate change and the impacts on household food security among rural farmers in uMzinyathi District of Kwazulu-Natal, South Africa," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 8(3), pages 597-608, June.
    7. Thierry Verdier, 2005. "Intégration commerciale « socialement responsable » : une approche en termes d'économie politique," Revue d’économie du développement, De Boeck Université, vol. 13(4), pages 55-121.
    8. Bhalotra, Sonia, 2010. "Fatal fluctuations? Cyclicality in infant mortality in India," Journal of Development Economics, Elsevier, vol. 93(1), pages 7-19, September.
    9. Verick, Sher. & Islam, Iyanatul., 2010. "The great recession of 2008-2009 : causes, consequences and policy responses," ILO Working Papers 994576933402676, International Labour Organization.
    10. repec:dem:demres:v:37:y:2017:i:27 is not listed on IDEAS
    11. Alejandro Gaviria, 2001. "Reacción de los hogares a las sacudidas adversas del ingreso en América Latina," Research Department Publications 4274, Inter-American Development Bank, Research Department.
    12. Nora Lustig, 2016. "Commitment to Equity Handbook. A Guide to Estimating the Impact of Fiscal Policy on Inequality and Poverty," Commitment to Equity (CEQ) Working Paper Series 1301, Tulane University, Department of Economics.
    13. Emmanuel Skoufias & Mauricio Santa María & Laura A. Ripani, 2007. "Cyclical Variations in Participation and Employment in Urban Labor Markets: the Case of Colombia and Mexico," COYUNTURA SOCIAL 012868, FEDESARROLLO.
    14. Miguel Braun & Luciano di Gresia, 2003. "Hacia un sistema de seguro social eficaz en América Latina: la importancia de una política fiscal anticíclica," Research Department Publications 4334, Inter-American Development Bank, Research Department.
    15. Quentin Wodon & Rodrigo Castro & Kihoon Lee, 2001. "Poverty in Latin America: Trends (1986-1998) and Determinants," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(114), pages 127-153.
    16. Jorge Enrique SAENZ CASTRO & Juan Pablo HERRERA SAAVEDRA & Oscar Enrique GUZMAN SILVA, 2003. "Contracciones leves y profundas: Efectos asimétricos sobre la pobreza. El caso colombiano 1984-2000," ARCHIVOS DE ECONOMÍA 002198, DEPARTAMENTO NACIONAL DE PLANEACIÓN.
    17. Mohseni-Cheraghlou, Amin, 2016. "The Aftermath of Financial Crises: A Look on Human and Social Wellbeing," World Development, Elsevier, vol. 87(C), pages 88-106.
    18. McKenzie, David J, 2004. "Aggregate Shocks and Urban Labor Market Responses: Evidence from Argentina's Financial Crisis," Economic Development and Cultural Change, University of Chicago Press, vol. 52(4), pages 719-758, July.
    19. María Ibarrarán & Matthias Ruth & Sanjana Ahmad & Marisa London, 2009. "Climate change and natural disasters: macroeconomic performance and distributional impacts," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 11(3), pages 549-569, June.
    20. Alexis Saludjian, 2007. "Le Régime d'Accumulation dans le Cône Sud-Americain depuis les années 1990. Crise de régulation ou crise d'accumulation ?," Post-Print halshs-00199770, HAL.
    21. Emmanuel Skoufias & Renata Gukovas & Thiago Scot, 2016. "Cyclical Variations in Participation and Employment in Urban Brazil," World Bank Other Operational Studies 24952, The World Bank.

    More about this item

    Keywords

    macroeconomis crises; poverty; economic policy; Latin America;

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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