Development Policy Revisited: Implications of the New Normal or Worse?

Policy Brief Number 12
October 2015

Development Policy Revisited: Implications of the New Normal Worse?

Author: Danny Leipziger

By 2015, the “new-normal” state of the world economy, including slow growth and higher indebtedness, had given way to a global malaise or low-growth equilibrium that had both demand and supply factors at its core. Persistent output gaps, higher public indebtedness combined with lower investments in the capital stock, and weak total factor productivity had lead us into uncharted territory. Public policy instruments were wanting and global confidence was skittish. Even more worrisome for EMDEs was the combination of low commodity prices, weak world trade growth, and volatile exchange rates. This paper examines how the changes in global economic circumstances might affect national policy decisions for development.

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Development Policy Revisited: Implications of the New Normal Worse?