The Social Impact of Financial Crises: Evidence from the Global Financial Crisis
Financial systems can contribute to economic development by providing people with useful tools for risk management, but when they fail to manage the risks they retain, they can create severe financial crises with devastating social and economic eff...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/11/18512644/social-impact-financial-crises-evidence-global-financial-crisis http://hdl.handle.net/10986/16912 |
| Summary: | Financial systems can contribute to
economic development by providing people with useful tools
for risk management, but when they fail to manage the risks
they retain, they can create severe financial crises with
devastating social and economic effects. The financial
crisis that hit the world economy in 2008-2009 has
transformed the lives of many individuals and families, even
in advanced countries, where millions of people fell, or are
at risk of falling, into poverty and exclusion. For most
regions and income groups in developing countries, progress
to meet the Millennium Development Goals by 2015 has slowed
and income distribution has worsened for a number of
countries. Countries hardest hit by the crisis lost more
than a decade of economic time. As the efforts to strengthen
the financial systems and improve the resilience of the
global financial system continue around the world, the
challenge for policy makers is to incorporate the lessons
from the failures to take into consideration the complex
linkages between financial, fiscal, real, and social risks
and ensure effective risk management at all levels of
society. The recent experience underscores the importance
of: systematic, proactive, and integrated risk management by
individuals, societies, and governments to prepare for
adverse consequences of financial shocks; mainstreaming
proactive risk management into development agendas;
establishing contingency planning mechanisms to avoid
unintended economic and social consequences of crisis
management policies and building a better capacity to
analyze complex linkages and feedback loops between
financial, sovereign, real and social risks; maintaining
fiscal room; and creating well-designed social protection
policies that target the vulnerable, while ensuring fiscal sustainability. |
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