The End of an Era? The Medium- and Long-Term Effects of the Global Crisis on Growth in Low-Income Countries

30 Pages Posted: 1 Feb 2011

See all articles by Andrew Berg

Andrew Berg

International Monetary Fund (IMF) - Developing Country Studies Division

Chris Papageorgiou

International Monetary Fund (IMF) - Research Department

Catherine A. Pattillo

affiliation not provided to SSRN

Nicola Spatafora

International Monetary Fund (IMF)

Date Written: September 2010

Abstract

This paper investigates the medium- and long-term growth effects of the global financial crises on Low-Income Countries (LICs). Using several methodological approaches, including impulse response function analysis, growth spells techniques and panel regressions, we show that external demand (ED) shocks are not historically associated with sharp declines in output growth. Given existing evidence that LICs were primarily impacted by such a shock in the global financial crisis, our analysis provides some optimism on the chances that LICs will avoid a protracted period of slow growth. However, we also show that there seem to be persistent output losses associated with ED shocks in the medium-run. In terms of policy implications, our analysis provides evidence that countries with lower deficits, lower debt, more flexible exchange rate regimes, and a higher stock of international reserves are more likely to dampen the effects of an ED shock on growth.

Keywords: Demand, Economic growth, External shocks, Financial crisis, Global Financial Crisis 2008-2009, Low-income developing countries

Suggested Citation

Berg, Andrew and Papageorgiou, Chris and Pattillo, Catherine A. and Spatafora, Nikola, The End of an Era? The Medium- and Long-Term Effects of the Global Crisis on Growth in Low-Income Countries (September 2010). IMF Working Papers, Vol. , pp. 1-29, 2010. Available at SSRN: https://ssrn.com/abstract=1750693

Andrew Berg

International Monetary Fund (IMF) - Developing Country Studies Division ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8843 (Phone)
202-589-8843 (Fax)

Chris Papageorgiou

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Catherine A. Pattillo

affiliation not provided to SSRN

No Address Available

Nikola Spatafora

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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