Journal Article

Macroeconomic Volatility and Welfare in Developing Countries: An Introduction

Norman V. Loayza, Romain Rancière, Luis Servén and Jaume Ventura

in The World Bank Economic Review

Volume 21, issue 3, pages 343-357
Published in print October 2007 | ISSN: 0258-6770
Published online October 2007 | e-ISSN: 1564-698X | DOI: http://dx.doi.org/10.1093/wber/lhm017
Macroeconomic Volatility and Welfare in Developing Countries: An Introduction

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Macroeconomic volatility, both a source and a reflection of underdevelopment, is a fundamental concern for developing countries. Their high aggregate instability results from a combination of large external shocks, volatile macroeconomic policies, microeconomic rigidities, and weak institutions. Volatility entails a direct welfare cost for risk-averse individuals, as well as an indirect one through its adverse effect on income growth and development. This article provides a brief overview of the recent literature on macroeconomic volatility in developing countries, highlighting its causes, consequences, and possible remedies. It then introduces the contributions of a recent conference on the subject, sponsored by the World Bank and Pompeu Fabra University, Barcelona.

Journal Article.  4183 words.  Illustrated.

Subjects: Development Planning and Policy

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