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Global Shocks and their Impacton Low-Income Countries; Lessons From theglobal Financial Crisis

  • Chris Papageorgiou
  • Hans Weisfeld
  • Catherine A. Pattillo
  • Martin Schindler
  • Nicola Spatafora
  • Andrew Berg

This paper investigates the short-run effects of the 2007-09 global financial crisis on growth in (mainly non-fuel exporting) low-income countries (LICs). Four conclusions stand out. First, for many individual LICs, 2009 was not extraordinarily calamitous; however, aggregate LIC output declined sharply because LICs were unusually synchronized. Second, the growth declines are on average well explained by the decline in export demand. Third, if the external environment facing LICs improves as forecast, their growth should rebound sharply. Finally, and contrary to received wisdom, there are few robust relationships between the cross-country growth variation and the policy and structural environment; the main exceptions are reserve coverage and labor-market flexibility.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/27.

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Length: 51
Date of creation: 01 Feb 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/27
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  1. International Monetary Fund, 2009. "Spillovers From the Rest of the World Into Sub-Saharan African Countries," IMF Working Papers 09/155, International Monetary Fund.
  2. Deaton, A., 1999. "Commodity Prices and Growth in Aftica," Papers 186, Princeton, Woodrow Wilson School - Development Studies.
  3. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
  4. Collier, Paul & Goderis, Benedikt, 2009. "Structural policies for shock-prone developing countries," MPRA Paper 17311, University Library of Munich, Germany.
  5. Ramcharan, Rodney, 2007. "Does the exchange rate regime matter for real shocks? Evidence from windstorms and earthquakes," Journal of International Economics, Elsevier, vol. 73(1), pages 31-47, September.
  6. Chinn, Menzie David & Wei, Shang-Jin, 2008. "A Faith-based Initiative: Does a Flexible Exchange Rate Regime Really Facilitate Current Account Adjustment?," CEPR Discussion Papers 7076, C.E.P.R. Discussion Papers.
  7. Norman V. Loayza & Romain Rancière & Luis Servén & Jaume Ventura, 2007. "Macroeconomic Volatility and Welfare in Developing Countries: An Introduction," World Bank Economic Review, World Bank Group, vol. 21(3), pages 343-357, October.
  8. William Easterly & Michael Kremer & Lant Pritchett & Lawrence H. Summers, 1993. "Good Policy or Good Luck? Country Growth Performance and Temporary Shocks," NBER Working Papers 4474, National Bureau of Economic Research, Inc.
  9. Erik Berglof & Yevgeniya Korniyenko & Alexander Plekhanov & Jeromin Zettelmeyer, 2010. "Understanding the Crisis in Emerging Europe," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(6), pages 985-1008, September.
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