Developing Countries in the Aftermath of the Financial Crisis – Constraints and Possible Outcomes

The on-going financial crisis, resulted mariahalep@yahoo.com from increased financial deregulation, easing monetary policy and a blind belief in financial markets’ efficiency and autoregulation, is still haunting the world economies. While the developed ones are still struggling to find growth, the impact on developing countries is mitigated. The purpose of this paper is to assess the economic and social impacts of the financial crisis fall-out on the developing countries. The first section briefly summarizes the factors having allowed the burst of the crisis and its contagion to the real economy. The second one analyzes the transmission channels of the crisis: terms of trade, volatility in commodity prices, poverty climb and income inequality. The third section gives some insights on the capacities of developing economies to respond to such an adverse external shock and the outstanding pressure. Forth section suggests possible solutions while acknowledging the limits of a theoretical exercise. The fifth section concludes.