Dragoslav Drag Avramović: Probing the Limits of Development and Stabilization Policy

Dragoslav Avramović was one of most accomplished economists in the area of applied development policy. He came from a small country with limited exposure to western economics, and made a stellar career at the World Bank and the Brandt Commission. His main achievements include: (i) A novel approach to external debt management based on dynamic assessment of indebtedness and borrowing capacity. It differed from standard debt-to-GDP ratio approach since it evaluated the efficiency and effectiveness of borrowed resources. (ii) Model for reducing volatility of commodity prices based on intervention fund (buffer stock) activated on either demand or supply side to prevent excessive price changes. (iii) Stabilizing record hyperinflation in his home country Serbia by introducing new currency, sound macro-monetary policy, and breaking inflationary expectations that reduced inflation and allowed price liberalization. He faced formidable political economy opposition to implementing debt management and commodity stabilization models, and structural reforms once the stabilization results were achieved. Keywords: Development, External debt, Commodity prices, Macroeconomic stabilization. JEL: O10.