## Avoid a Fall or Fly Again: Turning Points of State Fragility

_IMF Working Papers, May 6, 2021_

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## Bibliographic details
- Authors: Olusegun Ayodele Akanbi, Nikolay Gueorguiev, Jiro Honda, Paulomi Mehta, Kenji Moriyama, Keyra Primus, Mouhamadou Sy
- Published: May 6, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513573687.001

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### Research question and methods
- Empirically examines factors affecting turning points of entering and exiting from state fragility.
- Methods employed:
  - An event study.
  - The synthetic control method.
  - A logit model.

### Key findings
- High persistence of state fragility ("a fragility trap") implies substantial benefits from avoiding a fall into fragility and considerable hurdles to successful exit from fragility.
- Avoiding economic contraction is critical to prevent a country on the brink of fragility from falling into fragility.
  - Example statistic: among near fragile countries, the probability of entering fragility would rise by 40 percentage points should real GDP per capita growth decline from +2.5 percent to -2.5 percent.
- Strengthening government effectiveness, increasing political inclusion, and maintaining robust economic activity support more successful and sustainable exits from fragility.

### Policy implications and recommendations
- In the context of the COVID-19 crisis and its aftermath, the findings suggest:
  - Provide well-directed fiscal stimulus with sufficient financing, subject to appropriate governance safeguards and well-designed policies.
  - Protect critical socio-economic spending to keep vulnerable countries away from being caught in a fragility trap.
- Emphasize combined policy action:
  - Fiscal support to avoid economic contraction.
  - Reforms to improve government effectiveness.
  - Policies to increase political inclusion alongside measures to sustain economic activity.

### Thematic scope and analytical focus
- Focus areas highlighted in the study include:
  - Econometric analysis and logit models of state fragility turning points.
  - Links between income (real GDP per capita growth), government effectiveness, political inclusion, and fragility dynamics.
  - Relevance for sectors such as Education spending and Health care spending when protecting socio-economic priorities.

*Source: "Avoid a Fall or Fly Again: Turning Points of State Fragility", IMF Working Papers, May 6, 2021.*

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_Source: https://www.imf.org/en/publications/wp/issues/2021/05/06/avoid-a-fall-or-fly-again-turning-points-of-state-fragility-50242_