New Bank wisdom on economic crises

News|Bretton Woods Project|15 June 1999|update 13|url
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The Bank has identified 5 main ways in which macroeconomic crises affect the poor. They are changes in:

• prices, which change relative wages, employment patterns and consumption;
• aggregate labour demand;
• the rates of returns on assets;
• the level of public transfers, in cash and in kind; and
• the community environment, in terms of public health and/or safety.

The Bank argues that "the overarching priority for policymakers must be to take steps to avoid irreversible welfare losses to the poor...".

The Bank sets out an agenda of:

• choosing stabilisation policies that achieve their macroeconomic objectives at the least cost to the most vulnerable;
• ensuring that pro-poor public services are not cut back;
• setting up or reinforcing safety nets to provide effective insurance before a crisis, and assistance one hits;
• intervening to help preserve the social fabric of societies in crisis;
• setting up mechanisms to monitor the crisis impacts and evaluate responses.

Macroeconomic Crises and Poverty: Transmission Mechanisms and Policy Responses, available at: www.worldbank.org

gprennushi@worldbank.org

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Published: 15 June 1999 , last edited: 18 August 2003

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