Global Shocks and Their Impact on Low-Income Countries: Lessons from the global Financial Crisis

52 Pages Posted: 7 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

Martin Schindler

International Monetary Fund (IMF)

Nicola Spatafora

International Monetary Fund (IMF)

Hans Weisfeld

International Monetary Fund (IMF)

Date Written: February 2011

Abstract

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.

Keywords: Cross country analysis, Economic growth, Economic models, 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 Schindler, Martin and Spatafora, Nikola and Weisfeld, Hans, Global Shocks and Their Impact on Low-Income Countries: Lessons from the global Financial Crisis (February 2011). IMF Working Papers, Vol. , pp. 1-51, 2011. Available at SSRN: https://ssrn.com/abstract=1755444

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

Martin Schindler (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Nikola Spatafora

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Hans Weisfeld

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

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