Research on Economic Resilience

closed

The proposed TA will conduct research studies to understand how economies can better achieve economic resilience. Building on the analytical framework of Park, Ramayandi, and Shin (2015), it will explore the determinants of economic resilience at the country level and identify those factors that have the biggest role in resilience in the face of shocks. It will uncover why some economies are more resilient than others. It is also important to understand if the determinants of resilience differ for various types of shocks. For instance, do they differ for financial shocks, real sector shocks, and pandemics? In addition, there are major shocks that affect many developing member countries (DMCs) emanating from natural disasters, especially those due to climate change, and the resilience of economies is expected to vary for such type of shocks. It is therefore necessary to include an analysis of these shocks under the TA. At the firm level, there is a need to examine why some businesses are able to withstand shocks better than others, and why some firms even thrive during shocks while others struggle to keep afloat. There are also economic shocks that have occurred due to dependence on foreign sources for supply, and this particularly applies to energy. For example, the Russian invasion of Ukraine adversely affected energy supplies, thus raising the costs of imported energy and triggering inflationary pressures. The TA will also include an analysis of the key drivers of energy efficiency and renewable energy investment, which can help reduce vulnerability to shocks from reliance to external sources. Overall, government policies have a key role to play in building resilience against shocks,. There is a need to identify concrete macroeconomic policies, financial-sector policies, and structural policies that governments can put in to place to boost resilience.