External Financing and Balance of Payments Adjustment in Developing Countries: Getting a Better Policy Mix

Graham Bird

Chapter 2 in International Finance and the Developing Economies, 2004, pp 14-33 from Palgrave Macmillan

Abstract: Abstract There are a number of alternative strategies for dealing with current account balance of payments deficits. One is to ignore them altogether on the grounds that they do not matter. Here the argument is that in the long term the imbalance between domestic investment and savings, which the deficit reflects, will be automatically corrected and that, mindful of this, private external finance will be available to cover excess expenditure in the short term; net capital inflows will finance short-term net inward transfers of real resources. If, in long-run equilibrium, there is a close positive correlation between investment and saving across countries, net external financing will be merely a cyclical deviation from this.

Keywords: International Monetary Fund; External Financing; Structural Adjustment; Current Account Deficit; External Finance (search for similar items in EconPapers)
Date: 2004
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Journal Article: External financing and balance of payments adjustment in developing countries: Getting a better policy mix (1997)
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DOI: 10.1057/9780230599840_2

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