This article investigates how financial development helps to reduce poverty directly through a distributional effect, beyond its indirect effect through economic growth. The results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities (through the McKinnon 'conduit effect') but to some extent fail to reap the benefit from greater availability of credit. Moreover, financial development is accompanied by financial instability, which is particularly detrimental to the poor. Nevertheless, the benefits of financial development for the poor outweigh the cost.

Deforestation is a phenomenon that has largely been concentrated in the developing world. We construct a theoretical model of deforestation that focuses on the factors affecting the incentives to transform forested land into agricultural land. We show that: (i) lower discount rates and stronger institutions decrease deforestation; (ii) a depreciation in the real exchange rate increases deforestation in developing countries whereas the opposite obtains in developed countries; (iii) paradoxically, better institutions may exacerbate the deleterious impact of a depreciation in developing countries. These hypotheses are tested on an annual sample of 101 countries over the 1961-1988 period, and are not rejected by the data. Our results suggest that short-term macroeconomic policy, institutional factors, and the interaction between the two, are potentially important determinants of environmental outcomes.

This paper aims to assess the role of instabilities on Africa low rates of growth during the seventies and eighties, using cross-section econometric estimates, on a sample of African and non African countries and two pooled decades. Africa exhibits higher "primary" instabilities (climatic, terms of trade and political instabilities), i.e. instabilities which are structural rather than the result of policy. These "primary" instabilities influence Africa growth, through a lower growth residual more than a lower average rate of investment. They do so by their impact on economic policy, which is evidenced by their influence on two "intermediate" instabilities, the instabilities of the rate of investment and of the real exchange rate, which significantly lower the rate of growth. RésuméCet article vise à apprécier le rôle des "instabilités" dans le faible taux de croissance que les pays africains ont connu au cours des années 70 et 80. Les hypothèses sont testées sur un échantillon de pays africains et non africains, en utilisant un pooling des deux décennies. L'Afrique a connu de plus fortes instabilités "primaires" (instabilités climatiques, de termes de l'échange et sociaux politiques), lesquelles sont structurelles plutôt que le résultat de la politique économique. Ces instabilités primaires influencent la croissance africaine, en abaissant le résidu de croissance plutôt que le taux moyen d'investissement. Elles ont cet effet en raison de leur impact sur la politique économique, ce que fait apparaître leur influence sur deux instabilités "intermédiaires", celle du taux d'investissement et celle du taux de change effectif réel. Ces deux instabilités intermédiaires, elles-mêmes aussi plus élevées en Afrique, diminuent significativement le taux de croissance.

We analyse the relationship between income volatility and inequality and the conditional role played by aid and remittances. Using a panel of 142 countries for the period 1973 to 2012, we find that income volatility has an adverse impact on inequality, and that the poorest people are the most exposed to these fluctuations. However, while aid and remittances do not seem to have a clear direct impact on inequality, we uncover robust evidence which suggests that aid helps to dampen the negative effects of volatility on the distribution of income, while remittances do not.

* We gratefully acknowledge the contribution of the European Commission to the research on which this paper draws. We also wish to record our appreciation to the many officials and representatives of donor organization we met in the course of our four case studies. The views expressed in the paper are, however, solely those of the authors and cannot be taken to be the official position of the Commission, donor agencies or recipient governments.