The Urgency of Conflict Prevention – A Macroeconomic Perspective

Hannes Mueller, Christopher Rauh, Benjamin Seimon and Raphael Espinoza

No 2024/256, IMF Working Papers from International Monetary Fund

Abstract: Can macroeconomic policy effectively help prevent armed conflicts? This paper contends that two key criteria need to be satisfied: the long-term benefits of prevention policies must exceed the costs associated with uncertain forecasts, and the policies themselves must be directly able to contribute to conflict prevention. This paper proposes policy simulations, based on a novel method of Mueller et al (2024a) that integrates machine learning and dynamic optimization, to show that investing in prevention can generate huge long-run benefits. Returns to prevention policies in countries that have not suffered recently from violence range from $26 to $75 per $1 spent on prevention, and for countries with recent violence, the rate of return could be as high as $103 per $1 spent on prevention. Furthermore, an analysis of the available data and results in the literature suggest that sound macroeconomic policies and international support for these policies can play key roles in conflict prevention. Based on these findings, this paper proposes actionable recommendations, for both global and domestic policymakers as well as international financial institutions and multilateral organizations, to promote peace and stability through macroeconomic policy.

Keywords: Prevention; fragile state; conflict; machine learning; policy simulation; Policy recommendation; prevention policy; et al; conflict prevention; conflict stage country; building state capacity; Fiscal stance; Caribbean; Global; Africa (search for similar items in EconPapers)
Pages: 49
Date: 2024-12-20
New Economics Papers: this item is included in nep-big and nep-cmp
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