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War and UnderdevelopmentVolume 1: The Economic and Social Consequences of Conflict$
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Frances Stewart and Valpy Fitzgerald

Print publication date: 2000

Print ISBN-13: 9780199241866

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780199241866.001.0001

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Paying for the War: Economic Policy in Poor Countries Under Conflict Conditions

Paying for the War: Economic Policy in Poor Countries Under Conflict Conditions

(p.21) 2 Paying for the War: Economic Policy in Poor Countries Under Conflict Conditions
War and Underdevelopment

Valpy FitzGerald

Oxford University Press

Macroeconomic policy in wartime is concerned with reducing human suffering, particularly in poor countries where a large proportion of the population is near or below the poverty line. This chapter examines a ‘conflict economy’, which distinguishes ‘war shocks’ from other shocks familiar from modern development macroeconomics, and outlines the main fiscal and external-sector disequilibria that tend to emerge in wartime. It turns to the way in which civil society, firms, and households respond to the shocks and uncertainties of war, and what the consequences are for the macroeconomic behaviour. In addition, the chapter discusses macroeconomic policy in low-income countries affected by armed conflict. It sets out the basis for an alternative approach to macroeconomic stabilisation, which takes into account explicitly the disequilibrium nature of the low-income economy in conflict.

Keywords:   macroeconomic policy, wartime, disequilibrium, human suffering, poor countries, conflict economy, war shocks, armed conflict, macroeconomic stabilisation

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