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Policy responses to economic vulnerability


  • Willene Johnson


The present paper was prepared by Ms. Willene Johnson, member of the Committee for Development Committee, as a background paper for deliberations by the Committee at its eighth session. This study reviews policy efforts to advance growth and development in the least developed countries, in particular those efforts aimed at promoting well-being by reducing vulnerability to economic shocks. The paper draws on empirical research analysing the relationships between economic vulnerability, growth and policy. Given that domestic policy efforts are weakened by the shocks that characterize vulnerability, the international community has an important role to play in countries¡¯ efforts to cope with economic instability. The present paper begins with an assessment of certain international efforts to mitigate economic vulnerability and focuses on how these efforts may have reduced the likelihood of systemic shocks as well as on how they may have enhanced the resilience of individual countries with regard to shocks. The second part of the study examines how certain countries have used domestic policy instruments to mitigate and contain the economic risk factors that contribute to vulnerability and insecurity. The concluding section draws on the range of international and domestic policy responses with a view to identifying those interventions that have been successful or that show promise for promoting future development. The present paper does not explore issues related to conflict or the environment, yet it is clear that development can only be sustained when war and natural disasters are held at bay. These topics were omitted not because they are unimportant, but because they are too important and would be worthy of a more comprehensive treatment.

Suggested Citation

  • Willene Johnson, 2006. "Policy responses to economic vulnerability," CDP Background Papers 009, United Nations, Department of Economics and Social Affairs.
  • Handle: RePEc:une:cpaper:009

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    References listed on IDEAS

    1. de Janvry, Alain & Finan, Frederico & Sadoulet, Elisabeth & Vakis, Renos, 2006. "Can conditional cash transfer programs serve as safety nets in keeping children at school and from working when exposed to shocks?," Journal of Development Economics, Elsevier, vol. 79(2), pages 349-373, April.
    2. Roberto Frenkel & Lance Taylor, 2006. "Real Exchange Rate, Monetary Policy and Employment," Working Papers 19, United Nations, Department of Economics and Social Affairs.
    3. Arvind Subramanian & Devesh Roy, 2001. "Who Can Explain The Mauritian Miracle; Meade, Romer, Sachs or Rodrik?," IMF Working Papers 01/116, International Monetary Fund.
    4. Stefan Dercon, 2005. "Risk, Poverty and Vulnerability in Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 14(4), pages 483-488, December.
    5. Anne Case, 1995. "Symposium on Consumption Smoothing in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 81-82, Summer.
    6. Stefan Dercon & John Hoddinott & Tassew Woldehanna, 2005. "Shocks and Consumption in 15 Ethiopian Villages, 1999--2004," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 14(4), pages 559-585, December.
    7. Cashin, Paul & McDermott, C. John & Pattillo, Catherine, 2004. "Terms of trade shocks in Africa: are they short-lived or long-lived?," Journal of Development Economics, Elsevier, vol. 73(2), pages 727-744, April.
    8. Amartya Sen, 1999. "The Possibility of Social Choice," American Economic Review, American Economic Association, vol. 89(3), pages 349-378, June.
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    More about this item


    economic vulnerability; shocks; development;

    JEL classification:

    • F - International Economics
    • G - Financial Economics
    • H - Public Economics
    • O - Economic Development, Innovation, Technological Change, and Growth


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