Does Economic Collaboration Adjust the Effects of Financial Crises on Poverty in the Islamic Countries?

Poverty is arguably the most pressing economic problem of the time of global financial crisis that crisis have adverse impact on it through a variety of channels and typically lead to slowdowns in economic activity and, consequently, rise in formal unemployment and/or falls in real wages. On the other hand, it is generally argued in the literature that economic collaboration in the forms of financial and trade integrations is likely to enhance growth potentials and development of an economy and leads to poverty reduction. In this regard, the questions this paper addresses are how the life of poor people in the Islamic nations affected by financial crises, additionally, whether the implementation of economic collaboration strategies controls for the effects of crisis on poverty. In this paper, we specify a dynamic panel regression model of poverty using data of the selected Islamic countries over the period 1995–2008, in order to explore the effect of the recent global financial crises on poverty in such countries. This allows us to verify whether economic collaboration implementation would adjust such effect. Our findings showed that crisis will worsen the condition of living and will cause increasing poverty more that before crisis. However, the results imply a weak role of economic cooperation in the group of Islamic countries for controlling the effects of crisis on poverty and income distribution. The implication is that an economic integrating block implementation is not effective in reducing poverty in the Islamic countries and these countries should strengthen their economic cooperation in different areas and act according to principles of economic cooperation.