Global Shocks and their Impacton Low-Income Countries: Lessons From theglobal Financial Crisis

Chris Papageorgiou, Hans Weisfeld, Catherine A. Pattillo, Martin Schindler, Nicola Spatafora, Andrew Berg
2011 IMF Working Papers  
This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. 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
more » ... es (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. JEL Classification Numbers: F40; O40
doi:10.5089/9781455216741.001 fatcat:bmgjks36m5ag3a4h4ubxu4selq