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The End of an Era? The Medium- and Long-term Effects of the Global Crisis on Growth in Low-Income Countries

Author/Editor: Berg, Andrew | Papageorgiou, Chris | Pattillo, Catherine A. | Spatafora, Nicola
Authorized for Distribution: September 1, 2010
Electronic Access: Free Full Text (PDF file size is 1,171KB)
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Disclaimer: 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.

Summary: This paper investigates the medium- and long-term growth effects of the global financial crises on Low-Income Countries (LICs). Using several methodological approaches, including impulse response function analysis, growth spells techniques and panel regressions, we show that external demand (ED) shocks are not historically associated with sharp declines in output growth. Given existing evidence that LICs were primarily impacted by such a shock in the global financial crisis, our analysis provides some optimism on the chances that LICs will avoid a protracted period of slow growth. However, we also show that there seem to be persistent output losses associated with ED shocks in the medium-run. In terms of policy implications, our analysis provides evidence that countries with lower deficits, lower debt, more flexible exchange rate regimes, and a higher stock of international reserves are more likely to dampen the effects of an ED shock on growth.
 
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Series: Working Paper No. 10/205
Subject(s): Demand | Economic growth | External shocks | Financial crisis | Global Financial Crisis 2008-2009 | Low-income developing countries
Author's keyword(s): Global financial crisis | external shocks | low-income countries | medium- and long-term growth | impulse response functions | growth spells | panel growth regressions.
 
English  
    Published:   September 1, 2010        
            Format:   Paper
    Stock No:   WPIEA2010205   Pages:   29
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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