Financial Crises, Poverty, and Income Distribution

48 Pages Posted: 30 Jan 2006

See all articles by Emanuele Baldacci

Emanuele Baldacci

International Monetary Fund (IMF) - Fiscal Affairs Department

Luiz R. de Mello

OECD

Gabriela Inchauste

World Bank

Date Written: January 2002

Abstract

Developing and transition economies are prone to financial crises, including balance of payments and banking crises. These crises affect poverty and the distribution of income through a variety of channels: slowdowns in economic activity, relative price changes, and fiscal retrenchment, among others. This paper deals with the impact of financial crises on the incidence of poverty and income distribution, and discusses policy options that can be considered by governments in the aftermath of crises. Empirical evidence, based on both macro- and microlevel data, shows that financial crises are associated with an increase in poverty and, in some cases, income inequality. The provison of targeted safety nets and the protection of specific social programs from fiscal retrenchment remain the main short-term propoor policy responses to financial crises.

Keywords: Financial crises, poverty, income distribution, Mexico

JEL Classification: E44, I32

Suggested Citation

Baldacci, Emanuele and de Mello, Luiz R. and Inchauste Comboni, Maria Gabriela, Financial Crises, Poverty, and Income Distribution (January 2002). IMF Working Paper No. 02/4, Available at SSRN: https://ssrn.com/abstract=879312

Emanuele Baldacci (Contact Author)

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

Luiz R. De Mello

OECD ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France
+33-1-45.24.87.52 (Phone)

Maria Gabriela Inchauste Comboni

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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