External Constraints on Private Investment Decisions in Developing Countries

E. V. K. FitzGerald, Karel Jansen and Robert Vos

Chapter 11 in Trade, Aid and Development, 1994, pp 185-219 from Palgrave Macmillan

Abstract: Abstract To the extent that structural adjustment consists of more than macro-economic stabilisation, it must logically involve an increase in productive investment in the traded sector so that exports, national income and eventually employment can recover. However, in the view of both the World Bank and its critics (see e.g. World Bank, 1990; Mosley, Harrigan and Toye, 1991), despite a decade or more of strenuous attempts at adjustment, the record of private investment recovery has been poor. In the words of a recent survey of private investment behaviour in developing countries: in many countries, macroeconomic adjustment has not improved the response of private investment. Even when substantial progress has been made in correcting imbalances and restoring profitability — often through drastic cuts in real wages — the effect on private investment has been week and slow to appear. Many of these issues are difficult to explain in the context of conventional investment theories (Serven and Solimano, 1992a, p. 96).

Keywords: Real Exchange Rate; Private Investment; Public Investment; Capital Inflow; External Debt (search for similar items in EconPapers)
Date: 1994
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Working Paper: External Constraints on Private Investment Decisions in Developing Countries (1992)
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DOI: 10.1007/978-1-349-23169-0_11

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