Financing Problems of Developing Countries: Proceedings of a Conference held by the International Economic Association in Buenos Aires, Argentina

365 Pages·1985·31.37 MB·English

by  Armin Gutowski, A. A. Arnaúdo, Hans-Eckart Scharrer (eds.)

Financing Problems of
Developing Countries
The two dramatic increases in the world price of oil during the 1970s
have seriously worsened the economic prospects of many developing
countries. They have done so both directly - by increasing import
bills for oil - and indirectly - by slowing economic growth in
the developed countries, and so reducing their imports from develop-
ing countries.
The newly industrialising countries did not find it too difficult to
continue quite rapid development during the 1970s, not least because
they were able to borrow oil money recycled by the big international
banks. In the 1980s, the newly industrialising countries have found it
more difficult to borrow, not least because many of them are now
heavily in debt and some - like Mexico - have been in serious
financial difficulty.
Against this background, the International Economic Association
decided to organise a conference in Buenos Aires at which these
issues could be considered. It was attended by leading authorities on
the financing problems of developing countries, drawn from both the
developing and the developed world.
A distinguished programme committee organised the conference
under the chairmanship of Armin Gutowski, who provides a valu-
able introduction to the volume, summarising the conclusions of
the conference.
Together with a summary record of the discussion of the confer-
ence, the fifteen papers provide a valuable background for all who
wish to understand the difficulties being met at present in financing
economic development in the Third World. It does so by summar-
ising and interpreting the empirical evidence; by providing analyses
and models which throw new light on underlying structures, insti-
tutions and behaviour; and by challenging the conventional wisdom.
Hence, this volume identifies new policy options which can ease, if
not remove, the current constraints on economic development in
the Third World.
Armin Gutowski is Professor of Economics of the University of
Hamburg and President of the Hamburg Institute for International
Economics.
A.A. Arnaudo is Professor of Economics at the Universidad Nacional
de Cordoba, Argentina.
Hans-Eckart Scharrer is Director of International Finance at the
Hamburg Institute for International Economics.
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Financing Problems of
Developing Countries
Proceedings of a Conference held by the
International Economic Association in
Buenos Aires, Argentina
Edited by
Armin Gutowski
A.A. Arnaudo
and
Hans-Eckart Scharrer
M
MACMILLAN
© International Economic Association 1985
Softcover reprint ofthe hardcover lst edition 1985 978-0-333-34990-8
Ali rights reserved. No reproduction, copy or transmission
of this publication may be made without written permission.
No paragraph of this publication may be rcproduced, copied
or transmitted save with written permission or in accordance
with the provisions of the Copyright Act 1956 (as amended).
Any person who does any unauthorised act in relation to
this publication may be liable to criminal prosecution and
civil claims for damages.
First published 1985
Published by
THE MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 2XS
and London
Companies and representatives
throughout the world
British Library Cataloguing in Publication Data
Financing problems of developing countries.
1. Developing countries-Economic conditions
I. Gutowski, Armin II. Arnaudo, A.A.
III. Scharrer, Hans-Eckart IV. International
Economic Association
330.9172'4 HC59.7
ISBN 978-1-349-06751-0 ISBN 978-1-349-06749-7 (eBook)
DOI 10.1007/978-1-349-06749-7
Contents
Acknowledgements Vll
List of Participants ix
Introduction Armin Gutowski, A.A. Arnaudo and
Hans-Eckart Scharrer xi
PART ONE: THE 1980s
1 Capital Requirements in Economic Development: The
Decade Ahead Francis X. Colaco 3
PART TWO: DOMESTIC FINANCING
2 The Role of Domestic Financing in the Process of
Economic Development: Empirical Evidence
Egon Kemenes 29
3 The Financial Sector in the Planning of Economic
Development David Backus, Herminia Blanco,
David Levine 42
4 Savings Generation and Financial Programming in a
Basic Need Constrained Developing Economy
Jitendra G. Borpujari 59
5 The Role of Financial Institutions in Economic
Development: A Theoretical Analysis
Basant K. Kapur 83
6 The Role of the Public Sector in Mobilisation and
Allocation of Financial Resources W.T. Newlyn 98
7 Inflation and the Financing of Alternative Development
Strategies
Alfredo J. Canavese and Luisa Montuschi 115
Vl Contents
PART THREE: FOREIGN AND INTERNATIONAL
FINANCING
8 The Flow of Public and Private Financial Resources to
Developing Countries: Recent Trends
Helmut Fuhrer 139
9 The Role of International Financial Markets in the
Financing of Development T.M. Rybczynski 162
10 How to Manage a Repressed Economy
Ronald I. McKinnon 182
11 Oil Surplus Funds: The Impact of the Mode of
Placement Hazem El-Beblawi 210
12 External Financing and the Level of Development: A
Conceptual Approach Robert Z. Aliber 234
13 Foreign Indebtedness and Economic Growth: Is there a
Limit to Foreign Financing Armin Gutowski 249
14 Exchange-Rate Policy, International Capital Movements
and the Financing of Development
Alexandre Kafka 268
PART FOUR: NORTH AND SOUTH
15 New Approaches to Development Finance: A Critical
Look at the Brandt Report Proposals
Niels Thygesen 297
PART FIVE: THE DISCUSSIONS
16 Points from the Discussions A.A. Arnaudo 319
Index 349
Acknowledgements
In formulating the programme of the conference and in selecting
potential authors and discussants, the authors benefited greatly from
the advice of the members of the Programme Committee: Mahbub ul
Haq of the World Bank; Ivan Ivanov of the Institute for World
Economics in Moscow; Alexandre Lamfalussy of the Bank for Inter-
national Settlements; Ronald I. McKinnon of Stanford University;
Justinian F. Rweyemamu of the United Nations and Leopoldo Solis
of the Banco de Mexico.
It is only fair to say that without the invitation and the strong
support of the Asociaci6n Argentina de Economia Politica and its
president, Rolf R. Mantel, the conference would not have taken
place at all. Luisa Montuschi not only drafted a first outline of the
conference upon which the Programme Committee could draw, but
she and Alfredo J. Canavese were also responsible for all the local
arrangements. These ranged from fund-raising to making partici-
pants feel at home in Buenos Aires, duties which they fulfilled to the
admiration of their collaborators abroad as well as of their guests.
They had the generous logistic and financial support of the Central
Bank of Argentina - in whose premises the conference was held -
and of its staff. Financial assistance was also provided by the World
Bank, UNESCO, the OPEC Fund and various national institutions.
Our thanks, and the thanks of the International Economic Associ-
ation go to them all.
The list of supporters deserving special gratitude would be incom-
plete without mentioning the lEA officers and staff. Victor L.
Urquidi, the President of the lEA, was heavily involved in the
preparation of the conference, suggesting potential authors and
participants and raising international financial assistance. We owe
much to his endeavours and advice. Luc Fauvel, the Secretary-
General of the lEA and his experienced and diligent staff, especially
Elisabeth Boucherant, handled complex organisational matters
smoothly and efficiently. At the conference secretariat in Hamburg,
Rosemari Hafkesbring and Margot Hansen had to carry out extra
Vll
viii Acknowledgements
work besides their normal duties, and did so with skill and good
humour.
Finally, we are greatly indebted to Sir Douglas Hague, the General
Editor of the lEA, for his professional handling of the preparation of
this volume. If, despite many difficulties and obstacles, it has finally
been completed, this is mainly due to his insistence and involvement.
A.G.
A.A.
H.-E.S.
List of Participants
Professor Robert Z. Aliber, Graduate School of Business, University
of Chicago, USA
Professor Aldo Arnaudo, Faculty of Economic Science, National
University of Cordoba, Argentina
Professor David Backus, Department of Economics, Queen's Uni-
versity, Canada
Professor Silvio Borner, Institute for Current Economic Develop-
ment, University of Basle, Switzerland
Dr Jitendra G. Borpujari, International Monetary Fund, Washington
DC, USA
Professor Alfredo J. Canavese, Faculty of Economic Science, Uni-
versity of Buenos Aires, Argentina
Dr Francis X. Cola~o, World Bank, Washington DC, USA
Dr Guillermo de Ia Dehesa, Bank of Spain, Madrid, Spain
Professor Victor Jorge Elias, Tucuman, Argentina
Dr Raid Fahmi, Industrial Bank of Kuwait, Kuwait
Dr Helmut Fuhrer, OECD, Paris, France
Professor Ernesto Gaba, Buenos Aires, Argentina
Professor Armin Gutowski, HWWA -Institute for Economic Dev-
elopment, Hamburg, Germany
Mrs Chandra Hardy, Overseas Development Council, Washington
DC, USA
Professor Alexandre Kafka, International Monetary Fund, Washing-
ton DC, USA
Dr Basant K. Kapur, Department of Economics and Statistics,
National University of Singapore, Singapore
ix