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Macroeconomic Stability in Developing Countries: How Much Is Enough?

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  • Peter Montiel
  • Luis Servén

Abstract

Over the 1990s macroeconomic policies improved in most developing countries, but the growth dividend from this improvement fell short of expectations, and a policy agenda focused on stability turned out to be associated with a multiplicity of financial crises. This article examines the contents and implementation of the macroeconomic reform agenda of the 1990s. It reviews the progress achieved through fiscal, monetary, and exchange rate policies across the developing world and the effectiveness of the changing policy framework in promoting stability and growth. The main lesson is that more often than not slow growth and frequent crises resulted from shortcomings in the reform agenda of the 1990s. These concern limitations in the depth and scope of the reform agenda, its lack of attention to macroeconomic vulnerabilities, and its inadequate attention to complementary reforms outside the macroeconomic sphere. Copyright 2006, Oxford University Press.

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Bibliographic Info

Article provided by World Bank Group in its journal The World Bank Research Observer.

Volume (Year): 21 (2006)
Issue (Month): 2 ()
Pages: 151-178

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Handle: RePEc:oup:wbrobs:v:21:y:2006:i:2:p:151-178

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Cited by:
  1. Demir, Firat, 2007. "Private Investment, Portfolio Choice and Financialization of Real Sectors in Emerging Markets," MPRA Paper 3835, University Library of Munich, Germany, revised Jul 2007.
  2. Sanogo, Issa & Gyengani, Zakaria, 2008. "Private investment in guinea, does macro-instability matter? A comparative analysis," MPRA Paper 11606, University Library of Munich, Germany.
  3. Demir, FIrat, 2009. "Financial liberalization, private investment and portfolio choice: Financialization of real sectors in emerging markets," Journal of Development Economics, Elsevier, vol. 88(2), pages 314-324, March.
  4. Abbott, Philip & Andersen, Thomas Barnebeck & Tarp, Finn, 2010. "IMF and economic reform in developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 17-26, February.
  5. Francis X. Diebold & Kamil Yilmaz, 2008. "Macroeconomic Volatility and Stock Market Volatility, World-Wide," PIER Working Paper Archive 08-031, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  6. Ondřej Šimpach & Jitka Langhamrová, 2013. "Forecasting Future Salaries in the Czech Republic Using Stochastic Modelling," Business Systems Research, Society for Promotion of Business Information Technology (BIT), vol. 4(2), pages 4-16.
  7. DemIr, FIrat, 2009. "Capital Market Imperfections and Financialization of Real Sectors in Emerging Markets: Private Investment and Cash Flow Relationship Revisited," World Development, Elsevier, vol. 37(5), pages 953-964, May.

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