EXTERNAL FINANCIAL LIBERALIZATION IN DEVELOPING COUNTRIES : SOME ADVERSE CONSEQUENCES

Date

1993

Author

Boratav, Korkut

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Liberalization of capital movements under a high inflation regime in a developing country would most likely lead to an uncontrolled growth of the external debt. Adverse consequences on either the rate of investment or on the trade balance are likely to follow as well. These results are valid as long as developing countries face higher rates of inflation and larger margins between loan and deposit interest rates than those observed in capitalist metropoles. Under these conditions, exchange and interest rates lose their traditional and effective functions and policy makers face extremely difficult options.

URI

https://hdl.handle.net/11511/110154

Collections

Department of Economics, Article