Is Uruguay More Resilient This Time? Distributional Impacts of a Crisis Similar to the 2001–02 Argentine Crisis
The 2001–02 Argentine crisis had a profound impact on Uruguay’s economy. Uruguay’s gross domestic product shrank by 17.5 percent, and the proportion of people living below the poverty line doubled in only two years. It took almost 10 years for the poverty rate to recover to its precrisis level. T...
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| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
University of Warsaw
2015-08-01
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| Series: | Journal of Banking and Financial Economics |
| Subjects: | |
| Online Access: | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1087&context=jbfe |
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| Summary: | The 2001–02 Argentine crisis had a profound impact on Uruguay’s economy. Uruguay’s gross
domestic product shrank by 17.5 percent, and the proportion of people living below the poverty
line doubled in only two years. It took almost 10 years for the poverty rate to recover to its
precrisis level. This paper uses a macro-micro simulation technique to simulate the impact of
a similar crisis on the current Uruguayan economy. The simulation exercise suggests that Uruguay
would now be in a better place to weather such a severe crisis. The impact on poverty would be
considerably more moderate; inequality would not change significantly; and household incomes
would be 8 percent lower than in the absence of a crisis (almost 9 percent lower among households
in the bottom 40 percent of the income distribution). The paper also explores the changes in social
welfare policy that took place in the last decade that are protecting vulnerable groups from new
macroeconomic shocks. We find that, despite the new policies, young individuals, woman-headed
households, residents of Montevideo, and people who have not completed secondary education
are more vulnerable to falling into poverty were the crisis to strike. |
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| ISSN: | 2353-6845 |