6 loss of income, jobs, and access to goods and services by individual households and communities, rising prices and falling asset values, and the associated costly coping strategies that tend to affect economic and social well-being in the long run. Past trends indicate that 20 million people sink into poverty for each percentage point decline in GDP growth rate.<sup>18</sup> During the Asian crisis, overall poverty rose from 11 percent to 18 percent in Indonesia, and urban poverty doubled to 18 percent in Korea.<sup>19</sup> Previous studies also point to increased inequality associated with financial crises in a panel of advanced and emerging market countries during 1988-2010, with the impact rising along with severity of recessions.<sup>20</sup> Research also shows that average rise in income inequality during recessions tends to be larger than the fall during booms,<sup>21</sup> suggesting that the poor tend to get a bigger share of the pain than the prosperity.

Empirical literature also suggests pro-cyclicality of health and schooling outcomes in poorer countries—particularly so in Africa and low-income Asia. In middle-income countries in Latin America, while education outcomes are countercyclical (due to reduced opportunity cost of studying), health outcomes are more pro-cyclical (due to dominant income effects).<sup>22</sup> For example, in Mexico, infant and preschool mortality rose in the 1980s after the crisis, reversing the trend of the 1970s. Infant mortality also increased in the subsequent crises in Mexico (199495), Peru (1988-92), and Indonesia (1997-98). Higher malnutrition and lower birth weight were observed in Cameroon (the 1990s), Malaysia, Indonesia and Thailand (1997-98), and Argentina (2001-02). Life expectancy declined sharply in Russia and the former Soviet Union countries after the 1992 break up and in the 1998 crisis.<sup>23</sup> Economic crises also coincide with deterioration in social cohesion. During the Great Depression in 1929-32, for example, there was a 40 percent increase in suicide rates and a 10 percent increase in deaths from all causes in the United States. Similarly, there was a 39 percent increase in suicide rates among males in Japan during the Asian crisis, a 44 percent increase in Hong Kong SAR, China, and a 45 percent rise in Korea and Thailand.<sup>24</sup>

# **3  Stylized Facts from the Ongoing Global Financial Crisis**

These channels of transmission have also been at work during the global financial crisis that has shaken the global economy since late 2007, and have generated a similar deterioration in economic and social indicators around the world.

## **3.1  Product and labor market channel**

Available evidence indicates a substantial deterioration in output and employment conditions since 2007, although the extent of deterioration varies across regions. Economic growth plunged over the course of the crisis from 2007 to 2009 globally, and after a brief period of recovery in 2010, it tapered off before a subsequent dip in 2012 as the crisis resumed in the form of a

> 18 Feyen 2009. 19 Baldacci and others 2002; Calvo 2013. 20 Bordo and Meisner 2011. 21

> Calderón and Levy-Yeyati 2009. 22

> Ferreira and Schady 2009. 23 UN 2011; Ruhm 2000. 24 UN 2011.