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Avoid a Fall or Fly Again: Turning Points of State Fragility
Author:
Olusegun Ayodele Akanbinull

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Nikolay Gueorguievnull

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Mr. Jiro Honda
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Paulomi Mehta
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Mr. Kenji Moriyama
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Keyra Primus
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Mouhamadou Synull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2021: Issue 133
Language:
English
Publication Date:
06 May 2021
DOI:
https://doi.org/10.5089/9781513573687.001
ISBN:
9781513573687
ISSN:
1018-5941
Pages:
48
Keywords:
State fragility; government effectiveness; A. event study analysis; exit from fragility; effectiveness result; Logit models; Education spending; Health care spending; Income; Sub-Saharan Africa; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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High persistence of state fragility (a fragility trap) suggests the presence of substantial benefits from avoiding a fall into fragility and considerable hurdles to successful exit from fragility. This paper empirically examines the factors that affect the turning points of entering and exiting from state fragility by employing three different approaches: an event study, the synthetic control method, and a logit model. We find that avoiding economic contraction is critical to prevent a country on the brink of fragility from falling into fragility (e.g., among near fragile countries, the probability of entering fragility would rise by 40 percentage points should real GDP per capita growth decline from +2.5 percent to -2.5 percent). Also, strengthening government effectiveness together with increasing political inclusion and maintaining robust economic activity should help make exit from fragility more successful and sustainable. In the current environment (the COVID-19 crisis and its aftermath), the findings suggest the importance of providing well-directed fiscal stimulus with sufficient financing, (subject to appropriate governance safeguards and well-designed policies), and protecting critical socio-economic spending to keep vulnerable countries away from being caught in a fragility trap.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2021: Issue 133