This briefing is based on a literature review conducted as part of a research project funded by DFID. It reviews the range of policy responses to the global financial crisis. It sets out some useful frameworks and concepts to deepen our understanding of the issues, and to inform more effective assistance for countries affected by similar external shocks in the future.
The key points are:
- The effects of the global financial crisis vary between countries, depending on the structure of their economies, historical legacies and government policy responses
- The governance and institutional set up of a country is likely to influence its ability to respond effectively to economic shocks
- Understanding how politics and state capacity shape the response to shocks should inform donor support to affected countries
Foresti, M.; Massa, I.; Wild, L.; Harris, D. Responding to external economic shocks: why state capacity and political incentives matter. ODI Project Briefings (2010) No. 54, 4 pp.