The impact of the global financial crisis: What does this tell us about state capacity and political incentives to respond to shocks and manage risks? Literature review: synthesis of findings

Abstract

The main purpose of the literature review was to review the evidence of the effects of the crisis to date and to synthesise existing definitions and propositions about state capacity. Part 1 provides a brief overview of recent literature and case studies on the effects of the financial crisis in developing countries (e.g. ODI, IDS, IMF and WB), and to identify if and where the political and governance implications have been addressed. The literature review was supplemented by a consultation with southern and northern experts (including those involved in DFID funded ODI research on the crisis) on the key political and governance challenges in responding to the crisis. Part 2 focused on the review of the (mostly academic) literature on state capacity to respond to external economic shocks, drawing on literature, on the Asian financial crisis as well as earlier literature regarding structural adjustment, new institutional economics and impacts of globalisation. Part 3 reviews some of the recent literature on state capacity and globalisation, placing the current crisis in its historical context. The key messages and findings of the literature review are summarised in this synthesis