Poverty volatility and poverty in developing countries

Abstract This article examines the effect of poverty volatility on poverty in developing countries. Poverty volatility refers to the amplitude of the change in poverty rates over a given period of time. Variations in poverty rates can potentially arise from countries' vulnerability to a variety of shocks that induce greater macroeconomic volatility, including economic growth volatility. The empirical analysis shows that poverty volatility consistently induces a rise in poverty rates, and this positive poverty effect of poverty volatility increases as the degree of poverty volatility rises. Policies that help reduce poverty volatility (including by dampening economic growth volatility) would contribute to poverty reduction.