Assessing the Impact of the Global Financial and Economic Crisis in Developing Countries: The Case of Uruguay

MPIA Working Paper No. 2011-16

35 Pages Posted: 28 Oct 2011  

Carmen Estrades

International Food Policy Research Institute (IFPRI)

Cecilia Llambi

Centro de Investigaciones Economicas (CINVE - Uruguay)

Date Written: October 17, 2011

Abstract

This paper uses a static computable general equilibrium model (CGE) linked to a microsimulation model to analyze how the global crisis and some adopted policy responses may have affected the Uruguayan economy. The focus is on the trade channel and foreign capital flows, since they are the most important mechanisms through which the global crisis affected the Uruguayan economy. The crisis had a strong impact on exports and fixed investment. Poorest households would be the most affected, as they face a stronger reduction in real wages and a rise in unemployment. We find a negative impact on extreme poverty, but not on moderate poverty, as households near the poverty line would benefit from the fall in some consumer prices. A policy based in increasing current public consumption does moderately counteract some negative impacts of the crisis, but benefits mainly skilled workers, and does not act directly towards the most affected.

Keywords: Global economic crisis, Trade shock, Fiscal response, Uruguay, Unemployment

JEL Classification: D58, I32, G01, J68, H50

Suggested Citation

Estrades, Carmen and Llambi, Cecilia, Assessing the Impact of the Global Financial and Economic Crisis in Developing Countries: The Case of Uruguay (October 17, 2011). MPIA Working Paper No. 2011-16. Available at SSRN: https://ssrn.com/abstract=1945221 or http://dx.doi.org/10.2139/ssrn.1945221

Carmen Estrades

International Food Policy Research Institute (IFPRI) ( email )

2033 K Street, NW
Washington, DC 20006
United States

Cecilia Llambi (Contact Author)

Centro de Investigaciones Economicas (CINVE - Uruguay) ( email )

Uruguay 1242
Montevideo, 11100
United States

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