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Finance in conflict and reconstruction

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  • Tony Addison

    (World Institute for Development Economics Research (WIDER) of the United Nations University, Helsinki)

  • Philippe Le Billon

    (Overseas Development Institute, London)

  • S. Mansoob Murshed

    (World Institute for Development Economics Research (WIDER) of the United Nations University, Helsinki)

Abstract

The relationship between an economy's financial sector and the occurrence and resolution of conflict may at first sight appear tenuous. Banking systems, financial regulation, and currency arrangements do not appear to be relevant in understanding why nations collapse or why people kill each other. However, the linkages between the financial sector and issues of conflict are closer than one might expect. Narrow development-development that fails to reduce poverty and which exacerbates initial inequalities-is an important cause of conflict (but, needless to say, not the only one). Narrow development must be financed-and it is financed in ways that increase poverty and inequality and raise a society's propensity to violent conflict. During conflict, finance (both internal and external) can be decisive in determining who wins, as well as the duration of war. Rebuilding the financial system is important to reconstruction from war, since otherwise private investment is constrained. But 'post-conflict' economies generally have weak regulatory authorities, and the financial system may be flooded with unsound loans, leading to economic problems that can endanger economic recovery and therefore peace. Copyright © 2001 John Wiley & Sons, Ltd.

Suggested Citation

  • Tony Addison & Philippe Le Billon & S. Mansoob Murshed, 2001. "Finance in conflict and reconstruction," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(7), pages 951-964.
  • Handle: RePEc:wly:jintdv:v:13:y:2001:i:7:p:951-964 DOI: 10.1002/jid.844
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    References listed on IDEAS

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    1. Christopher J. Jarvis, 1999. "The Rise and Fall of the Pyramid Schemes in Albania," IMF Working Papers 99/98, International Monetary Fund.
    2. Addison, Tony & Geda, Alemayehu, 2001. "Ethiopia's New Financial Sector and Its Regulation," WIDER Working Paper Series 055, World Institute for Development Economic Research (UNU-WIDER).
    3. E. V. K. Fitzgerald, 1997. "Paying for the war: Macroeconomic stabilization in poor countries under conflict conditions," Oxford Development Studies, Taylor & Francis Journals, vol. 25(1), pages 43-65.
    4. Tony Addison & Philippe Le Billon & S. Mansoob Murshed, 2002. "Conflict in Africa: The Cost of Peaceful Behaviour," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 11(3), pages 365-386, September.
    5. Mosley, Paul & Hulme, David, 1998. "Microenterprise finance: Is there a conflict between growth and poverty alleviation?," World Development, Elsevier, vol. 26(5), pages 783-790, May.
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    Cited by:

    1. Tony Addison & Alemayehu Geda & Philippe Le Billon & S Mansoob Murshed, 2005. "Reconstructing and Reforming the Financial System in Conflict and 'Post-Conflict' Economies," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 703-718.
    2. Audrey Rose Menard, 2014. "Do natural resources condition the aid-governance relationship? Evidence from Africa," Economics Bulletin, AccessEcon, vol. 34(2), pages 1317-1326.
    3. Michal Matul & Caroline Tsilikounas, 2004. "Role of microfinance in the household reconstruction process in Bosnia and Herzegovina," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(3), pages 429-466.
    4. Tony Addison & Mansoob Murshed, 2005. "Transnational terrorism as a spillover of domestic disputes in other countries," Defence and Peace Economics, Taylor & Francis Journals, pages 69-82.
    5. Baddeley, M.C., 2008. "Poverty, Armed Conflict and Financial Instability," Cambridge Working Papers in Economics 0857, Faculty of Economics, University of Cambridge.
    6. Murshed, S. Mansoob & Gates, Scott, 2004. "Spatial Horizontal Inequality and the Maoist Insurgency in Nepal," WIDER Working Paper Series 043, World Institute for Development Economic Research (UNU-WIDER).

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