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

By Chris Papageorgiou, Hans Weisfeld, Catherine A Pattillo, Martin Schindler, Nikola Spatafora, Andrew Berg

February 1, 2011

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Chris Papageorgiou, Hans Weisfeld, Catherine A Pattillo, Martin Schindler, Nikola Spatafora, and Andrew Berg. Global Shocks and their Impacton Low-Income Countries: Lessons From theglobal Financial Crisis, (USA: International Monetary Fund, 2011) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Balance of payments, Exchange rate arrangements, Foreign direct investment, Foreign exchange, International trade, Labor, Labor market flexibility, Production, Production growth, Terms of trade

Keywords: Demand growth, Exchange rate arrangements, External demand, External shocks, FDI shock, Foreign direct investment, Global, Global financial crisis, Growth rate, Labor market flexibility, Low-income countries, Non-fuel-exporting middle-income countries, Per-Capita GDP Growth, Production growth, Regression analysis, Short-run growth, Terms of trade, Terms of trade growth, WP

Publication Details

Pages:

51
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/027
Stock No:

WPIEA2011027
ISBN:

9781455216741
ISSN:

1018-5941

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