Chapter 14

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Chapter 14

Balance of
Payments,
Developing
-
Country
Debt, and the
Macroeconomic
Stabilization
Controversy

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14
-
2

The Balance of Payments Account


General considerations

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14
-
3

Table 14.1

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4

The Balance of Payments Account


General considerations


A hypothetical illustration: deficits and debts

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5

Table 14.2

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6

Table 14.3

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7

Table 14.4

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8

Financing and Reducing
Payments Deficits


Some initial policy issues


Recent trends in LDC balance of payments

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9

Table 14.5

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10

The Debt Crisis of the 1980s


Background and analysis

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Third World Debt Crisis

Net capital inflow, F
N
, is

Where

d

is percent increase in total debt



D

is total debt



r

is the average interest rate

Basic transfer, BT, is

(14.1)

(14.2)

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12

Third World Debt Crisis


Background and analysis


Dimensions of the crisis

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13

Table 14.6

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14

Table 14.7

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Figure 14.1

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16

Attempts at Alleviation: Macroeconomic
Instability, IMF Stabilization Policies,

and Their Critics


The IMF stabilization program

(see appendix 14.1 for an analysis

of the IMF and the World Bank)


Tactics for debt relief


Has the debt problem disappeared?
Winners and losers


Conclusions

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Concepts for Review


Amortization


Balance of payments


Basic transfer


Brady plan


Capital account


Capital flight


Cash account


Conditionality


Current account


Debt
-
for
-
equity swaps


Debt
-
for
-
nature swaps


Debtors’ cartel


Debt repudiation


Debt service


Deficit

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Concepts for Review (cont’d)


Euro


External debt


Hard currency


International reserve
account


International reserves


IMF


Macroeconomic
instability


Restructuring


Special drawing rights
(SDRs)


Stabilization policies


Structural adjustment
loans


Surplus


World Bank