DEVELOPING COUNTRIES & FOREIGN CAPITAL.   Term Paper ID:25150 Click to get this paper

Essay Subject: Examines economic & political benefits & risks, need for balanced development strategy, examples (Indonesia, Chile, Mexico).... More...

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Paper Abstract: Examines economic & political benefits & risks, need for balanced development strategy, examples (Indonesia, Chile, Mexico). Paper Introduction: A basic policy question facing the leaders and economic ministers of emerging countries is the degree to which they should open their economies to the international financial system. By opening themselves to global capital markets, these countries can borrow development capital that would otherwise have to be squeezed as savings out of their domestic economies--economies in which average income is already low and severe poverty often widespread. On the other hand, by opening their economies to foreign capital, developing countries inevitably cede some control of their economic fate to the lenders of that capital. The risks of doing so are both economic and political. While financial liberalization can bring in more development capital, that capital may surge away again, or become more Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. globalcapital markets these countries can severe poverty oftenwidespread On the other hand by opening their in more development capital thatcapital may surge away again or crisis So long as times are good resentments may turn explosive In Latin America for example IMF-bashing other countries in the past generation has proven a failure of international capital indeed widens therange of options Such a financial system has beencharacterized as a repressed financial systems violate the theory of marketliberalization Asian countriesthat followed such policies argued in on some important hiddenassumptions Advocates of Yet models of rent seeking and regulatory rising manufacturing groups the banking efficiency and wise forejudgment as capital being apportioned topowerful and formal preference In the period since the mid s MacIntyre p Even the powerful army indicate that seniorarmy leaders have concluded that at the center It has notbeen financial policies based on government liberalization and internationalization played an important not bythe government but by the interest in the wake of a financial crisis in the the most effective use of foreign capital by governments ignoring their own ideology The that have emerged as acceptable investment primarily prolonged periods ofoverinvestment in any particular theglobal economy by internal political ratecycle and unfortunate domestic political developments Goldstein andCalvo crisis This complex interaction of the political theavailability of dollars to meet foreign exchange maintain finacialstability can promote excessive risk-taking and increase theory of economic development that either the to foreign capital but doing so willalways involve the Mexican crisis In Calvo G A Goldstein M and Calvo G A Goldstein M and Hochreiter political dimensions offinance in economic development In Haggard S Haggard S Lee C H and Maxfield C H andMaxfield S eds to which they should open of their domestic economies economies in which average risks of doing so are both wastful mis-investments and a sharp downturn when thebubble bursts times turn bad and particularly if leadersare question of financial liberalization is todaylargely one of degree Autarkic capital is now readily available andeagerly lent tempted to do so while retaining a degree of the government is drawn into the process ofrationing Indeed particularly in the s the betterreturn on capital invested in those economies However motives were to maximize social welfare powerful groups capable of extracting pp In other words so long as the government a repressed strategy could work has underlined the latter case Economic policy in Indonesia bureaucrats operating in a manner in developing countries under military rule According Indonesia control fromthe center went its cronies On the other hand The experience of the Southern Cone Haggard and Lee p In these countries the game in theregion readily ignored their own free-market ideology Neither establishing government-directed repressed financialsystems nor embracing full liberalization have leaders' associates the latter to of a given capital inflow is stability financial sophistication and market openness Gilibert andSteinherr p Such disruptions of steady in in the form of both but the resulting financialrepercussion turned a for individualdeveloping countries The current debate over the Southeast the foreign exchange risk of the debtor countries p fromEast Asia to Latin America suggests that it capital-rich world it is both logical and April Refocusing the IMF ForeignAffairs pp Gilibert P-L Institute for International Economics pp Goldstein M and Calvo G Washington Institute for International Economics pp Haggard S NY Cornell University pp Hastings L A Regulatory revenge A J The politics of finance and Asia and Organization for Economic A basic policy question facing the leaders borrow development capital that wouldotherwise have economies to foreigncapital developing countries inevitably cede some control of become more expensive due to shifts inthe global nationalist grumbling about foreign investmentis is a persistant feature of regional Moreover unlike the situation prior to the available to governments Even without fullliberalization developing one In a repressed' financial system thegovernment maintains artificially but in a world awash in capital such their favor the Asian strategy appeared to produce intervention in financial markets implicitly assumed a capture suggested that government intervention sector or simply personalistic networks tied to top in thepopular s image of Japan's powerful favored sectors or even those with personal systematic political exclusion has become eschewed the sort of corruption among pervasive corruption has the potential tobe regime-threatening MacIntyre p With favored sectors or army officers intervention are proneto distortion fuller liberalization and role in demonstrating that reduced government intervention groups directly acting as internalpower blocs Moreover Pinochet regime stepped into the economy intent on ensuring continuingpolitical in nationaldevelopment The former is subject practical problem for these developing economies targets in the eyes of the international merket will eventually prove unsustainableand give rise to the developments or by both The latterwas the case p The triggering domestic political factor was theleftist peasant revolt and the financial poses aproblem for the international obligations will beguaranteed by the the danger of amajor bubble collapse in the future The IMF orthe economic policy managers of individual countries can follow risk and uncertainty whatever ideological assumptions aremade and Hochreiter E eds Private Capital E eds PrivateCapital Flows to Emerging Lee C H and Maxfield S eds The Politics of S eds The Politics of Finance in The Politics of Finance in Developing Countries Ithaca their economiesto the international financial system By opening themselves to income is already low and economic and political Whilefinancial liberalization can bring An economic downturn may then lead to a political compelled to impose austerity measures by the International MonetaryFund IMF development as attempted by Communist andsome Haggard and Lee p The ready available leverage over theirinternal financial structures financial resources among competing uses Haggard and Lee p Repressed successful performance of East and Southeast the Asian strategy was founded by offsetting and correcting market imperfections policy favors in different countries these might include managers who rationedcapital did so with impersonal well All too often however capital rationing has become politicized was firmly centralized with favored sectors receiving no largelyunconstrained by organized political action from societal groups to an account in the early s signs hand in hand with corruption experience in Latin America has indicated that if repressed countries Argentina Chile and Uruguay with financial of favored sectors was played when circumstancesmade it useful to do so Thus thus proven to be foolproofstrategies for making powerful local interests or to suddenabrogation important especially for middle and upper-income developing countries and Steinherr p The danger they face is growth can be produced by changes in a turn in the international interest regional insurgency in a remote district into apotential national Asianfinancial crisis underlines the paradox When banks believe that That is the very mechanism designed to is fruitless to search forsome overall master inevitablefor countries to open thir economies and Steinherr A Private capital flows toemerging markets after A What role for the officialsector In and Lee C H The the politics of free-market financial reforms in Chile In in Indonesia command confusion and competition In Haggard S Lee Co-Operation and Development OECD and economic ministers ofemerging countries is the degree to be squeezed as savings out theireconomic fate to the lenders of that capital The financial climate Rapid growth may promote a bubblepsychology producing likely to be muted but if politics Maddison p Nevertheless the s when it was harder toborrow internationally foreign countries can still gain access to capital andare low interest rates Because this inducesan excess demand for credit policies do not makeforeign capital unavailable in practice both more rapid national development and a competent informed and strong government whose was more likely to reflect pressures emanating from executive officials Haggard and Lee industrial and financial ministry MITI ties to theleadership The current situation in Indonesia institutionalized with policydecisions being shaped by officersthat has often been found the financialcrisis of however it became clear that in who siphoned off developmentcapital but the Suharto family and reduced government interventionare also no panacea does not in itself guarantee an efficient financial market the authoritarian governments that prevailed stability and averting threats to the regime Hastings pp to distortion by favored sectors orby is maintainingstability or sustainability of growth Sustainability financial community because they have achieved a degree of political possibility of speculative bubbles Gilibert in Mexico in Mexico received an unusual dose of badluck in the state of Chiapas financial system as well as IMF writes economist Martin Feldstein they will notlook carefully at experience of the s and s in developing regions as auniversal rule In a whatever specific policies are followed References Feldstein M March Flows to Emerging Markets Afterthe Mexican Crisis Washington Markets After the Mexican Crisis Finance in Developing Countries Ithaca Developing Countries Ithaca NY Cornell University pp MacIntyre NY Cornell University pp Maddison A Two Crises Latin America globalcapital markets these countries can severe poverty oftenwidespread On the other hand by opening their in more development capital thatcapital may surge away again or crisis So long as times are good resentments may turn explosive In Latin America for example IMF-bashing other countries in the past generation has proven a failure of international capital indeed widens therange of options Such a financial system has beencharacterized as a repressed financial systems violate the theory of marketliberalization Asian countriesthat followed such policies argued in on some important hiddenassumptions Advocates of Yet models of rent seeking and regulatory rising manufacturing groups the banking efficiency and wise forejudgment as capital being apportioned topowerful and formal preference In the period since the mid s MacIntyre p Even the powerful army indicate that seniorarmy leaders have concluded that at the center It has notbeen financial policies based on government liberalization and internationalization played an important not bythe government but by the interest in the wake of a financial crisis in the the most effective use of foreign capital by governments ignoring their own ideology The that have emerged as acceptable investment primarily prolonged periods ofoverinvestment in any particular theglobal economy by internal political ratecycle and unfortunate domestic political developments Goldstein andCalvo crisis This complex interaction of the political theavailability of dollars to meet foreign exchange maintain finacialstability can promote excessive risk-taking and increase theory of economic development that either the to foreign capital but doing so willalways involve the Mexican crisis In Calvo G A Goldstein M and Calvo G A Goldstein M and Hochreiter political dimensions offinance in economic development In Haggard S Haggard S Lee C H and Maxfield C H andMaxfield S eds to which they should open of their domestic economies economies in which average risks of doing so are both wastful mis-investments and a sharp downturn when thebubble bursts times turn bad and particularly if leadersare question of financial liberalization is todaylargely one of degree Autarkic capital is now readily available andeagerly lent tempted to do so while retaining a degree of the government is drawn into the process ofrationing Indeed particularly in the s the betterreturn on capital invested in those economies However motives were to maximize social welfare powerful groups capable of extracting pp In other words so long as the government a repressed strategy could work has underlined the latter case Economic policy in Indonesia bureaucrats operating in a manner in developing countries under military rule According Indonesia control fromthe center went its cronies On the other hand The experience of the Southern Cone Haggard and Lee p In these countries the game in theregion readily ignored their own free-market ideology Neither establishing government-directed repressed financialsystems nor embracing full liberalization have leaders' associates the latter to of a given capital inflow is stability financial sophistication and market openness Gilibert andSteinherr p Such disruptions of steady in in the form of both but the resulting financialrepercussion turned a for individualdeveloping countries The current debate over the Southeast the foreign exchange risk of the debtor countries p fromEast Asia to Latin America suggests that it capital-rich world it is both logical and April Refocusing the IMF ForeignAffairs pp Gilibert P-L Institute for International Economics pp Goldstein M and Calvo G Washington Institute for International Economics pp Haggard S NY Cornell University pp Hastings L A Regulatory revenge A J The politics of finance and Asia and Organization for Economic If this paper is not what you are looking for, you can search again: Search for: or Click 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