Credit UNICEF/UNI561766/Ibarra Sánchez
Credit UNICEF/UNI561766/Ibarra Sánchez
Credit UNICEF/UNI561766/Ibarra Sánchez
Credit UNICEF/UNI561766/Ibarra Sánchez
Macroeconomic policy can play a key role in preventing armed conflict, in turn saving lives and avoiding injuries, forced displacement and migration, and vast damage to the economy.
That’s according to new IMF research, based on policy simulations incorporating machine learning-based predictions of conflict. The paper finds that every $1 invested in prevention—through policy efforts to promote macroeconomic stability and growth, strengthen institutions, and support local community development—can save between $26 and $103 in possible conflict-related costs. These include the cost of massive humanitarian needs as well as lost economic output.
As the Chart of the Week shows, those savings are particularly notable in high-risk countries suffering from recent violence.
Creating economic opportunities that can help foster peace and stability is more critical than ever. Last year, state-based conflicts rose to their highest level in half a century, according to the Uppsala Conflict Data Program at Sweden’s Uppsala University. Non-state violence also is at a high level. In this context, the IMF is paying greater attention to fragile and conflict-affected states, including through a dedicated strategy.
Recent IMF research shows that three areas of domestic macroeconomic policies are especially effective in reducing the risk of conflict, at reasonable costs:
As benefits from prevention are highest where violence has not yet fully erupted, developing early warning systems will be crucial for policymakers. This is especially important in fragile states where social tensions and risks may be on the rise but are currently less visible.
These findings underscore the importance of well-tailored economic policies and capacity building not only for overcoming fragility, but also potentially to reduce the risk of armed conflict in fragile states.
—This blog is based on an IMF working paper by Raphael Espinoza of the IMF Western Hemisphere Department, Hannes Mueller of the Barcelona School of Economics, Christopher Rauh of Cambridge University, and Benjamin Seimon of the Fundació d'Economia Analítica in Barcelona.
