Macroeconomic Volatility and Welfare in Developing Countries: an Introduction

Abstract : 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.
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Norman V. Loayza, Romain Rancière, Luis Servén, Jaume Ventura. Macroeconomic Volatility and Welfare in Developing Countries: an Introduction. World Bank Economic Review, Oxford University Press (OUP), 2007, 21 (3), pp.343-357. ⟨10.1093/wber/lhm017⟩. ⟨halshs-00754201⟩

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