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Finance in conflict and reconstruction

Author

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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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    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. Tony Addison & S. Mansoob Murshed, 2002. "Credibility and Reputation in Peacemaking," Journal of Peace Research, Peace Research Institute Oslo, vol. 39(4), pages 487-501, July.
    4. 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.
    5. Tony Addison & Mansoob Murshed, 2005. "Transnational terrorism as a spillover of domestic disputes in other countries," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(2), pages 69-82.
    6. Abdelbaki, Professor Hisham, 2013. "The Arab spring: do we need a new theory?," MPRA Paper 54801, University Library of Munich, Germany, revised 2013.
    7. S. Mansoob Murshed & Scott Gates, 2005. "Spatial–Horizontal Inequality and the Maoist Insurgency in Nepal," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 121-134, February.
    8. Tony Addison & Abdur Chowdhury & Mansoob Murshed, 2002. "By How Much Does Conflict Reduce Financial Development?," WIDER Working Paper Series DP2002-48, World Institute for Development Economic Research (UNU-WIDER).
    9. Baddeley, M.C., 2008. "Poverty, Armed Conflict and Financial Instability," Cambridge Working Papers in Economics 0857, Faculty of Economics, University of Cambridge.
    10. Mansoob Murshed & Scott Gates, 2004. "Spatial Horizontal Inequality and the Maoist Insurgency in Nepal," WIDER Working Paper Series RP2004-43, World Institute for Development Economic Research (UNU-WIDER).
    11. Olalekan C. Okunlola & Olumide A. Ayetigbo & Sam O. Ajiye, 2022. "Does a free market system reduce conflict in Africa?," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 24(1), pages 147-170, June.

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