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Copyright © 2006 Pearson Addison-Wesley. All rights reserved. Chapter 14 Balance of Payments, Developing-Country Debt, and the Macroeconomic Stabilization.

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Presentation on theme: "Copyright © 2006 Pearson Addison-Wesley. All rights reserved. Chapter 14 Balance of Payments, Developing-Country Debt, and the Macroeconomic Stabilization."— Presentation transcript:

1 Copyright © 2006 Pearson Addison-Wesley. All rights reserved. Chapter 14 Balance of Payments, Developing-Country Debt, and the Macroeconomic Stabilization Controversy

2 Copyright © 2006 Pearson Addison-Wesley. All rights reserved The Balance of Payments Account n General considerations

3 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 14.1

4 Copyright © 2006 Pearson Addison-Wesley. All rights reserved The Balance of Payments Account n General considerations n A hypothetical illustration: deficits and debts

5 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 14.2

6 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 14.3

7 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 14.4

8 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Financing and Reducing Payments Deficits n Some initial policy issues n Recent trends in LDC balance of payments

9 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 14.5

10 Copyright © 2006 Pearson Addison-Wesley. All rights reserved The Debt Crisis of the 1980s n Background and analysis

11 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Third World Debt Crisis Net capital inflow, F N, is Whered is percent increase in total debt D is total debt r is the average interest rate Basic transfer, BT, is (14.1) (14.2)

12 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Third World Debt Crisis n Background and analysis n Dimensions of the crisis

13 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 14.6

14 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Table 14.7

15 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 14.1

16 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Attempts at Alleviation: Macroeconomic Instability, IMF Stabilization Policies, and Their Critics n The IMF stabilization program (see appendix 14.1 for an analysis of the IMF and the World Bank) n Tactics for debt relief n Has the debt problem disappeared? Winners and losers n Conclusions

17 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Concepts for Review n Amortization n Balance of payments n Basic transfer n Brady plan n Capital account n Capital flight n Cash account n Conditionality n Current account n Debt-for-equity swaps n Debt-for-nature swaps n Debtors’ cartel n Debt repudiation n Debt service n Deficit

18 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Concepts for Review (cont’d) n Euro n External debt n Hard currency n International reserve account n International reserves n IMF n Macroeconomic instability n Restructuring n Special drawing rights (SDRs) n Stabilization policies n Structural adjustment loans n Surplus n World Bank


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