The Role of Institutions in Shaping Economic and Climate Outcomes

This month, the International Monetary Fund released its revised World Economic Outlook for 2020.  It is worth taking a look through their current release, which although describing a dire forecast for 2020 is actually significantly improved on its expectations from just a few months earlier.

In Europe, the hardest-hit countries were Spain (-12.8%), Italy (-10.6%), France and the UK (both -9.8%).  In relative terms, Germany (-6%), Japan (-5.3%) and the US (-4.7%) have suffered economically relatively less.  Some of the biggest developing countries are expected to experience very large downturns including India (-10.1%), Mexico (-9%), Brazil (-5.8%), South Africa (-8%) and even the ASEAN-5 (-3.4%). The one country that is expected to have a positive growth rate in 2020 is China at +1.9%

At a time of systemic challenges, the IMF is often viewed as being as close an institution as we have to an international lender of last resort.  However, as explained in this Council on Foreign Relations backgrounder, there have been many criticisms of its so-called structural adjustment policies and the concern that it imposed austerity on already-weak economies.

Interestingly, although the IMF (unlike sister organisations like the World Bank) has historically not been concerned with environmental considerations, that has been changing in recent years and the third and final chapter of their WEO is on climate.  Clearly, there is an important link between the choices made on how to pursue a recovery and the climate impacts that follow, as seen in the figure drawn from the article by Cameron Hepburn and colleagues that I showed in the first class.

  1. How well do you think institutions help explain the differential outcomes across countries over the course of 2020? (Perhaps pick a couple of countries to illustrate the differences) Which institutions do you think have mattered most in dealing with the immediate crisis? Which institutions will be most important in helping countries emerge out of the current crisis (NB: I don’t say ‘economic/GDP” outcomes although that could be where you might choose to focus)
  2. Will the countries that have fared better provoke emulation or resentment?
  3. What priority should climate (or on any number of other important issues) have in assembling a response to the pandemic?

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