Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Effect of Productive Capacities on Economic Resilience in Developing Countries

Version 1 : Received: 29 April 2021 / Approved: 5 May 2021 / Online: 5 May 2021 (12:29:50 CEST)

How to cite: Gnangnon, S.K. Effect of Productive Capacities on Economic Resilience in Developing Countries. Preprints 2021, 2021050048 (doi: 10.20944/preprints202105.0048.v1). Gnangnon, S.K. Effect of Productive Capacities on Economic Resilience in Developing Countries. Preprints 2021, 2021050048 (doi: 10.20944/preprints202105.0048.v1).

Abstract

The COVID-19 outbreak and its economic, social and financial fallouts have generated a renewed interest in finding adequate policies and means to strengthen economic resilience to future shocks, particularly in developing countries. The latter are usually disproportionately affected by adverse shocks (compared to developed countries) and lack the adequate resources to weather these shocks. Strengthening economic resilience is now at the heart of the policy discussion both at the national and international levels. The present paper aims to contribute to this debate by investigating the effect of productive capacities on economic resilience in a panel dataset of 118 developing countries over the period 2000-2018. It constructs a regression-based economic resilience indicator, and makes use of the indicator of productive capacities recently developed by the UNCTAD. Results are quite interesting, including from a policy perspective. The development of productive capacities is associated with greater economic resilience. This is particularly the case for countries with greater trade openness, greater capital account openness, and those that promote a stable macroeconomic environment. Interestingly, development aid appears to matter for the effect of productive capacities on economic resilience. On the one hand, the magnitude of the positive economic resilience effect of productive capacities increases as countries receive higher Aid for Trade (AfT) flows. On the other hand, NonAfT flows (i.e., other development aid flows that AfT flows) hinder the possible positive contribution of productive capacities to economic resilience. These findings have important policy implications that are discussed in the paper.

Subject Areas

Productive capacities; Economic resilience; Developing countries.

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