Abstract
Developing countries tend to run current account balance of payments deficits on their trade in goods and services. Decumulating international reserves as a means of financing such deficits is not a long-term option, and may not even be a short-term option where reserves are already meagre. Inflows of capital in the form of either foreign aid or private capital offer a potential alternative. Failing to attract capital inflows implies that national income and domestic living standards will have to decline. An imbalance where domestic saving falls short of domestic investment either calls for foreign financing or for corrective domestic action which reduces consumption or investment. Given the related adjustment costs, developing countries will be anxious to make themselves attractive to foreign creditors. But how can they do this?
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Allen, C., Currie, D., Srinivasan, T. and Vines, D. (1992). ‘Policy interactions between OECD countries and Latin America in the 1980’, The Manchester School, 60, 1–20.
Bird, G. (1989). Commercial Bank Lending and Third World Debt. London: Macmillan, ch. 1 and 2.
Bird, G. (1994). ‘The myths and reality of IMF lending’, The World Economy, 17 (5), 759–78.
Bird, G. (1998). ‘Exchange rate policy in developing countries: what is left of the nominal anchor approach?’, Third World Quarterly, 19 (2), 255–76.
Bird, G. and Rowlands, D. (1997). ‘The catalytic effect of lending by the international financial institutions’, The World Economy, 20 (7), 967–92.
Blomstrom, M., Lipsey, R. E. and Zejan, M. (1996). Is fixed investment the key to economic growth’, Quarterly Journal of Economics, CXI(1), 209–16.
Calvo, G. A. (1996). ‘Capital flows and macroeconomic management: tequila lessons’, International Journal of Finance and Economics, 1 (3), 207–24.
Calvo, G. A., Leiderman, L. and Reinhart, C. M. (1993). ‘Capital inflows and real exchange rate appreciation in Latin America: the role of external factors’, IMF Staff Chapters, 40 (1), 108–51.
Calvo, G. A., Leiderman, L. and Reinhart, C. M. (1996). ‘Inflows of capital to developing countries in the 1990s’, Journal of Economic Perspectives, 10 (2), 125–39.
Calvo, S. and Reinhart, C. (1996). ‘Capital flows in Latin America: is there evidence of contagion effects?’, Policy Research Working Papers, 1619. Washington, DC: The World Bank.
Cardoso, E. A. and Dornbusch, R. (1989). ‘Foreign private capital flows’. In Chenery, H. and Srinivasan, T. N. (eds), Handbook of Development Economics, 11.
Chuhan, P., Claessens, S. and Mamingi, N. (1993). ‘Equity and bond flows to Asia and Latin America’. Policy Research Working Papers, No. 1160. Washington, DC: The World Bank.
Claessens, S., Dooley, M. and Warner, A. (1995). ‘Portfolio capital flows: hot or cold?’, The World Bank Economic Review, 9.
Corbo, V. and Hernandez, L. (1996). ‘Macroeconomic adjustment to capital inflows: lessons from recent Latin American and East Asian Experience’, World Bank Research Observer, 11 (1), 61–85.
Corden, M. (1993). ‘Exchange rate policies for developing countries’, Economic Journal, 105 (423), 198–207.
Daveri, F. (1995). ‘Costs of entry and exit from financial markets and capital flows to developing countries’, World Development, 23, 1375–85.
Dornbusch, R. (1992). ‘The case for trade liberalisation in developing countries’, Journal of Economic Perspectives, 6 (1), 69–85.
Easterly, W., Kremer, M., Pritchett, L. and Summers, L. H. (1993). ‘Good policy or good luck? Country growth performance and temporary shocks’, Journal of Monetary Economics, 32, 459–83.
Easterly, W. and Schmidt-Hebbel, K. (1993). ‘Fiscal deficits and macroeconomic performance in developing countries’, World Bank Research Observer, 8 (2), 211–38.
Fanneli, J., Frenkel, M. R. and Taylor, L. (1994). ‘Is the market-friendly approach friendly to development: a critical assessment’. In Bird, G. and Helwege, A. (eds), Latin America’s Economic Future. New York: Academic Press.
Fernandez-Arias, E. (1996), ‘The new wave of capital inflows: push or pull?’, Journal of Development Economics, 48 (2), 389–418.
Fernandez-Arias, E. and Montiel, P. J. (1996). ‘The surge in capital inflows to developing countries: an analytical overview’, The World Bank Economic Review, 10, 51–77.
Garber, P. M. (1996). ‘Managing risks to financial markets from volatile capital flows: the role of prudential regulation’, International Journal of Finance and Economics, 1 (3), 183–96.
Goldstein, M., Mathieson, D. J. and Lane, T. (1991). ‘Determinants and systemic consequences of international capital flows’. In Determinants and Systemic Consequence of International Capital Flows, March, Occasional Paper No. 77. Washington, DC: International Monetary Fund.
Graham, E. M. (1995). ‘Foreign direct investment in the world economy’. In Staff Studies for the World Economic Outlook Washington, DC: IMF.
Greene, J. and Villaneuva, D. (1991). ‘Private investment in developing countries: an empirical analysis’, IMF Staff Papers, 38 (1), 33–58.
Guttentag, J. M. and Herring, R. J. (1986). ‘Disaster myopia in international banking’, Essays in International Finance, No. 164, Princeton.
Haque, N. ul, Kumar, M. S., Mark, N. and Matthiesen, D. J. (1996). ‘The economic content of indicators of developing country creditworthiness’, IMF Staff Papers, 43 (4), 68–723.
IMF, (1995). ‘Saving in a growing world economy’. In World Economic Outlook. Washington, DC: IMF.
Killick, T. (1995). IMF Programmes in Developing Countries: Design and Impact. London: Routledge.
Krugman, P. (1994). Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations. New York: W. W. Norton.
Krugman, P. (1995). ‘Dutch tulips and emerging markets’, Foreign Affairs, 28 (4), 28–44.
Krugman, P. (1998). ‘What happened to Asia?’, mimeographed, January.
Malkiel, B. G. (1990). A Random Walk Down Wall Street. New York: W. W. Norton.
Mankiw, N. G. (1995), ‘The growth of nations’, Brookings Papers on Economic Activity,No. 1.
Milesi-Ferretti, M. G. and Razin, A. (1996). Current account sustainability, Princeton Studies in International Finance, No. 81.
Montiel, P. J. (1995). ‘The new wave of capital inflows: country policy chronologies’,mimeographed, Oberlin College, Department of Economics, Oberlin, Ohio.
Obstfeld, M. (1995). ‘International capital mobility in the 1990s’. In Kenen, P. B. (ed.)Understanding Interdependence: The Macroeconomics of the Open Economy. Princeton: Princeton University Press.
Radelet, S. and Sachs, J. (1998). ‘The East Asian financial crisis: diagnosis, remedies,prospects, mimeographed’, Brookings Papers on Economic Activity, 1, 1–75.
Rodrik, D. (1992). ‘The limits of trade policy reform in developing countries’, Journal of Economic Perspectives, 6 (1), 87–105.
Rodrik, D. (1996). ‘Understanding economic policy reform’, Journal of Economic Literature, XXXIV (1), 9–41.
Sachs, J. D., Tornell, A. and Velasco, A. (1995). ‘The collapse of the Mexican peso: what have we learned?’, NBER Working Paper, No. 5142, June.
Sachs, J. D. and Warner, A. M. (1995a). ‘Natural resource abundance and economic growth’, Harvard Institute for International Development, mimeographed, December.
Schadler, S., Carkovic, M., Bennett, A. and Kahn, R. (1993). ‘Recent experiences with surges in capital inflows’, IMF Occasional Paper, 108, December.
Taylor, M. P. and Sarno, L. (1997). ‘Capital flows to developing countries: long term and short term determinants’, World Bank Economic Review, 11 (3).
Williamson, J. (1993). ‘Issues posed by portfolio investment in developing countries’. In Claessens, S. and Gooptu, S. (eds), Portfolio Investment in Developing Countries, World Bank Discussion Papers, Washington, DC: The World Bank.
World Bank (1991). World Development Report, Washington, DC: World Bank.
Young, A. (1995). ‘The tyranny of numbers: confronting the statistical realities of the East Asian growth experience’, Quarterly Journal of Economics, 641–80.
Author information
Authors and Affiliations
Copyright information
© 2004 Palgrave Macmillan, a division of Macmillan Publishers Limited
About this chapter
Cite this chapter
Bird, G. (2004). How Important is Sound Domestic Macroeconomics in Attracting Capital Inflows to Developing Countries?. In: International Finance and the Developing Economies. Palgrave Macmillan, London. https://doi.org/10.1057/9780230599840_9
Download citation
DOI: https://doi.org/10.1057/9780230599840_9
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-40773-6
Online ISBN: 978-0-230-59984-0
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)