Macroeconomic Volatility and Welfare in Developing Countries: An Introduction

Posted: 16 Jun 2008

See all articles by Norman Loayza

Norman Loayza

World Bank - Research Department

Romain G. Rancière

University of Southern California

Luis Servén

World Bank - Development Research Group (DECRG)

Jaume Ventura

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: 2007

Abstract

Macroeconomic volatility, both a source and a reflection of underdevelopment, is a fundamental concern for developing countries. Their high aggregate instability results from a combination of large external shocks, volatile macroeconomic policies, microeconomic rigidities, and weak institutions. Volatility entails a direct welfare cost for risk-averse individuals, as well as an indirect one through its adverse effect on income growth and development. This article provides a brief overview of the recent literature on macroeconomic volatility in developing countries, highlighting its causes, consequences, and possible remedies. It then introduces the contributions of a recent conference on the subject, sponsored by the World Bank and Pompeu Fabra University, Barcelona.

Suggested Citation

Loayza, Norman and Rancière, Romain G. and Servén, Luis and Ventura, Jaume, Macroeconomic Volatility and Welfare in Developing Countries: An Introduction (2007). The World Bank Economic Review, Vol. 21, Issue 3, pp. 343-357, 2007. Available at SSRN: https://ssrn.com/abstract=1146050 or http://dx.doi.org/lhm017

Norman Loayza (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Romain G. Rancière

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Luis Servén

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Jaume Ventura

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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