Crises and the Poor: Socially Responsible Macroeconomics

Inter-American Development Bank, Sustainable Development Department, Poverty and Inequality Advisory Unit Working Paper No. 108

36 Pages Posted: 23 Apr 2000

Multiple version iconThere are 2 versions of this paper

Date Written: February 2000

Abstract

Macroeconomic crises not only affect the current living standards of the poor, but their ability to grow out of poverty. This paper presents evidence on the impact of economic crisis on poverty and inequality in Latin America. Crises not only result in higher poverty rates but also may cause irreversible damage to the human capital of the poor. In light of this evidence, the author concludes that crisis avoidance and a pro-poor response to crisis should be a major component of a poverty reduction strategy. As a result, the paper analyses the role of exchange rate policy, capital controls and countercyclical fiscal policy in generating or avoiding crisis. Responses to macroeconomic crisis are assessed by considering the effects of different policy combinations, the use of safety nets and the composition of fiscal adjustment to protect the income of the poor in the face of macroeconomic adjustment. The main lesson is that socially responsible macroeconomic policy can protect the poor during times of crisis and simultaneously contribute to lower chronic poverty.

JEL Classification: E62, H53, N36, I30

Suggested Citation

Lustig, Nora Claudia, Crises and the Poor: Socially Responsible Macroeconomics (February 2000). Inter-American Development Bank, Sustainable Development Department, Poverty and Inequality Advisory Unit Working Paper No. 108. Available at SSRN: https://ssrn.com/abstract=214994 or http://dx.doi.org/10.2139/ssrn.214994

Nora Claudia Lustig (Contact Author)

Tulane University ( email )

6823 St Charles Ave
New Orleans, LA 70118
United States

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