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On The Economic Vulnerability Of Low Income Countries révisé, cf 2000.16



    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

This paper examines the relevance of the economic vulnerability concept for low income countries, a topic of recent concern in several international bodies. It first considers some conceptual clarifications and a method to build an internationally comparable indicator. Three factors of vulnerability are distinguished: shocks, exposure and resilience or capacity to react (the first two ones being more structural, the third one more related to policy). To measure the two main kinds of shocks (natural and external), proposed proxies are respectively the instability of agricultural production and the instability of the purchasing power of exports, while the (smallness of) the population size can be used as a proxy for (structural) exposure. To aggregate the various possible indicators in a composite index of (structural) economic vulnerability, weights can be drawn from their estimated impact on growth. Then selected issues related to the impact of vulnerability on growth are considered: "primary" instabilities (climate, terms of trade, political troubles) are found to slow growth, more by their effect on the total factor productivity growth than on the rate of investment, to do so through "intermediate" instabilities (of the rate of investment and of the real exchange rate), and in agricultural economies through the impact at the farmer level. Besides its negative effects on growth, vulnerability is assumed to increase aid effectiveness: the more the recipient country is vulnerable the more aid contributes to growth. Implications are drawn for aid allocation and aid design.

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Paper provided by CERDI in its series Working Papers with number 199916.

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Length: 28
Date of creation: 1999
Date of revision:
Handle: RePEc:cdi:wpaper:115
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  1. Aizenman, Joshua & Marion, Nancy, 1999. "Volatility and Investment: Interpreting Evidence from Developing Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 157-79, May.
  2. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  3. Guillaumont, Patrick, 1987. "From export instability effects to international stabilization policies," World Development, Elsevier, vol. 15(5), pages 633-643, May.
  4. Lim, David, 1980. "Income Distribution, Export Instability, and Savings Behavior," Economic Development and Cultural Change, University of Chicago Press, vol. 28(2), pages 359-64, January.
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  7. Collier, Paul & Dollar, David, 1999. "Aid allocation and poverty reduction," Policy Research Working Paper Series 2041, The World Bank.
  8. Collier, Paul & Guillaumont, Patrick & Guillaumont, Sylviane & Gunning, Jan Willem, 1997. "Redesigning conditionality," World Development, Elsevier, vol. 25(9), pages 1399-1407, September.
  9. Guillaumont, Patrick & Jeanneney, Sylviane Guillaumont & Brun, Jean-Francois, 1999. "How Instability Lowers African Growth," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(1), pages 87-107, March.
  10. Rodrik, Dani, 1998. "Where Did all the Growth Go? External Shocks, Social Conflict and Growth Collapses," CEPR Discussion Papers 1789, C.E.P.R. Discussion Papers.
  11. Guillaumont, Patrick & Guillaumont, Sylviane & Plane, Patrick, 1988. "Participating in African monetary unions: An alternative evaluation," World Development, Elsevier, vol. 16(5), pages 569-576, May.
  12. Patrick GUILLAUMONT & Sylviane GUILLAUMONT JEANNENEY & Paul COLLIER & Jan Willem GUNNING, 1997. "Rénover le Stabex," Working Papers 199723, CERDI.
  13. Glezakos, Constantine, 1984. "Export Instability and Economic Growth: Reply," Economic Development and Cultural Change, University of Chicago Press, vol. 32(3), pages 615-23, April.
  14. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  15. Serven, Luis, 1997. "Irreversibility, Uncertainty and Private Investment: Analytical Issues and Some Lessons for Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 229-68, Supplemen.
  16. Moran, Cristian, 1983. "Export fluctuations and economic growth : An empirical analysis," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 195-218.
  17. Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
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