The Global Financial Crisis and Development Thinking

The global financial crisis has not only dealt a major blow to the global economy, but also shaken confidence in economic management in the developed world and the economic models that guide it. The crisis has revealed major market failures, especially in the housing bubble and its transmission to the financial system, but also glaring state failures that propagated and exacerbated the crisis. Will the events of the past two years lead to major shifts in thinking about development economics, and should they? This paper assesses that question for several key domains of development thinking, including the market-state balance, macroeconomic management, globalization, development financing, and public spending. On the one hand, changed global circumstances and new awareness of vulnerability should lead to some policy changes, as developing countries take steps to reduce and buffer risks, including risks generated in developed countries. At the same time, the crisis should largely reinforce the Post-Washington Consensus on development that has emerged over the past decade -- a world view that aims to achieve private sector-driven growth but sees a facilitating role for the state, promotes engaging with the global economy in ways that advance development, and values pragmatism, experimentation, and evidence-based policymaking over ideology.

Bibliographic Details

Main Author:	Rogers, F. Halsey
Language:	English
Published:	2010-06-01
Subjects:	ACTIVE MARKETS, ADMINISTRATIVE CONTROL, ADVANCED ECONOMIES, ARBITRAGE, ASSET PRICE, ASYMMETRIC INFORMATION, AVERAGE PRODUCTIVITY, BAILOUT, BAILOUTS, BANK POLICY, BANKING SYSTEM, BANKRUPTCY, BOND, BOND RATING, BORROWER, CAPITAL ACCOUNT, CAPITAL ACCOUNT LIBERALIZATION, CAPITAL ACCOUNTS, CAPITAL FLOWS, CAPITAL MARKETS, CENTRAL BANK, CENTRAL BANKS, CLIMATE CHANGE, COMMERCIAL BANKS, COMPARATIVE ADVANTAGE, CONSUMERS, CORPORATE GOVERNANCE, COST-BENEFIT, CREDIT AVAILABILITY, CREDIT LINE, CRISIS COUNTRIES, CURRENCY, CURRENT PRICES, DEBT, DEBT CRISIS, DEBT FINANCING, DEBT LEVELS, DEBTS, DEFAULT RISK, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DEVELOPMENT STRATEGIES, DEVELOPMENT STRATEGY, DOMESTIC MARKETS, ECONOMIC ACTIVITY, ECONOMIC CRISES, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC MODELS, ECONOMIC OUTLOOK, ECONOMIC POLICIES, ECONOMIC PROBLEMS, ECONOMIC RESEARCH, ECONOMIC THOUGHT, EFFICIENT MARKET, EMERGING ECONOMIES, EMERGING MARKETS, EQUITY FINANCING, EXCESS RETURNS, EXCHANGE RATE, EXOGENOUS SHOCKS, EXPORT GROWTH, EXPORT VOLUMES, EXPORTERS, EXPORTS, EXTERNAL BORROWING, EXTERNAL DEBT, EXTERNAL SHOCKS, FEDERAL RESERVE, FEDERAL RESERVE BANK, FINANCES, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL INCENTIVES, FINANCIAL INSTITUTIONS, FINANCIAL LIBERALIZATION, FINANCIAL MARKETS, FINANCIAL POLICIES, FINANCIAL POLICY, FINANCIAL REGULATION, FINANCIAL RISK, FINANCIAL SECTOR, FINANCIAL SERVICES, FINANCIAL SYSTEM, FISCAL DEFICIT, FISCAL DEFICITS, FISCAL POLICIES, FISCAL POLICY, FOREIGN BANKS, FOREIGN CAPITAL, FOREIGN DEBT, FOREIGN DIRECT INVESTMENT, FOREIGN INVESTORS, FULL EMPLOYMENT, GDP, GLOBAL CAPITAL, GLOBAL DEVELOPMENT FINANCE, GLOBAL ECONOMY, GLOBAL MARKETS, GLOBAL RECESSION, GLOBAL TRADE, GLOBALIZATION, GOVERNMENT ACTION, GOVERNMENT REGULATION, HEALTH SERVICES, HEDGE FUNDS, HOME OWNERSHIP, HOST COUNTRIES, HOUSEHOLD SAVING, HOUSING, HOUSING FINANCE, HOUSING PRICES, HUMAN DEVELOPMENT, IMPERFECT INFORMATION, IMPORTS, INCOME, INCOME GROWTH, INCOME LEVELS, INDUSTRIALIZATION, INFLATION, INFLATION RATES, INFORMATION ASYMMETRIES, INFORMATION TECHNOLOGY, INFORMED INVESTORS, INSTITUTIONAL ENVIRONMENT, INSURANCE, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL FINANCE, INTERNATIONAL FINANCIAL INSTITUTIONS, INTERNATIONAL PORTFOLIO, INTERNATIONAL TRADE, INVESTING, INVESTMENT BANKS, INVESTMENT CLIMATE, KEYNESIAN ECONOMICS, LEVY, LIQUIDITY, LOAN, LOAN MARKETS, LOWER PRICE, MACROECONOMIC MANAGEMENT, MACROECONOMIC POLICY, MACROECONOMIC RISKS, MACROECONOMIC STABILITY, MACROECONOMIC VOLATILITY, MACROECONOMICS, MARKET DEVELOPMENT, MARKET ECONOMY, MARKET EFFICIENCY, MARKET FAILURES, MARKET FOR SECURITIES, MARKET MECHANISM, MARKET PARTICIPANTS, MARKET PLAYERS, MARKET PRICES, MARKET SIZE, MATURE MARKETS, MONETARY ECONOMICS, MONETARY FUND, MONETARY POLICY, MORTGAGE, MORTGAGE DEBTS, MORTGAGE-BACKED SECURITIES, NATIONAL SAVING, NEGATIVE EXTERNALITIES, NEOCLASSICAL MODELS, NET EXPORTS, OLIGARCHY, PEER PRESSURES, PENSION, POLICY ADVICE, POLICY RESPONSES, POLITICAL ECONOMY, PORTFOLIO CAPITAL, PORTFOLIO INVESTMENT, PORTFOLIOS, PRICE SERIES, PRODUCT MARKETS, PROFITABILITY, PROPERTY RIGHTS, PRUDENTIAL REGULATION, PUBLIC AGENCIES, PUBLIC POLICY, PUBLIC SERVICES, PUBLIC SPENDING, RATING AGENCIES, REAL EXCHANGE RATE, REGULATOR, REGULATORS, REGULATORY AGENCIES, REGULATORY AGENCY, REGULATORY GAPS, REGULATORY INFRASTRUCTURE, REGULATORY STRUCTURE, REGULATORY STRUCTURES, RESERVES, RESOURCE ALLOCATION, RETIREMENT, RETURN, RETURNS, RISKY ASSETS, SAVINGS, SAVINGS BEHAVIOR, SHORT-TERM CAPITAL, SHORT-TERM LIQUIDITY, SOLVENCY, STATE FAILURES, STATE INTERVENTION, SUPPLY SHOCKS, SWAPS, SYSTEMIC RISK, TAX, TRADING, UNCERTAINTIES, UNDERLYING PROBLEMS, UNEMPLOYMENT, VALUATION, VALUATIONS, VALUE AT RISK MODELS, WEALTH, WEALTH EFFECTS, WORLD ECONOMY,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100629111506 https://hdl.handle.net/10986/3838
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