New Bank wisdom on economic crises
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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