Maravi

Develop policies that will reduce economic volatility - World Bank

Develop policies that will reduce economic volatility - World Bank
By Florence Bupe
Friday July 06, 2007 [04:00]

THE World Bank has advised third world countries to develop policies that will reduce their economic volatility. In the June 2007 edition of the Research Digest, the World Bank observed that developing countries had continued to have the highest level of macroeconomic volatility and this was impacting negatively on development.

“The connection between volatility and lack of development is undeniable, making volatility a fundamental development concern,” the World Bank stated.

It was noted that volatility had large welfare costs on third world countries, and accounted for about five to 10 per cent deviation from the normal consumption path.

The bank cautioned that if no effective policies to curb volatility were put in place, output growth would be impeded and impact on future consumption.

The World Bank attributed high volatility levels to greater exogenous shocks in developing countries, higher domestic shocks and weaker shock absorbers.

“The greater volatility in developing countries stems from three sources. First, developing counties receive bigger exogenous shocks, which may come form financial markets caused by sudden stops of capital inflows. Increased volatility may also stem from instability in the development process and self-inflicted policy mistakes. Further, due to weak shock absorbers, external fluctuations have larger effects on their macroeconomic stability,” it stated.

Developing countries were advised to develop more stringent fiscal policies to counter the challenge of increased economic instability.

Labels: HYPOCRISY, World Bank

posted by MrK @ 3:51 AM