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Balance of Payments Policy in Developing Countries

In: Managing Global Money

Author

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  • Graham Bird

    (University of Surrey)

Abstract

An initial difficulty facing policy makers in dealing with a country’s external sector is to recognise when there is a balance of payments (BoP) problem. Although such a problem is frequently taken to be synonymous with a current account deficit, this is in fact a very narrow and potentially misleading indicator. The deficit may be temporary, or it may be offset by capital inflows, and it may not therefore constitute much of a problem; except in the sense that, first, the capacity for even short-run financing by running down reserves or by borrowing is strictly limited, second, capital inflows are unreliable, and third, the foreign exchange needed to repay loans has to be earned at some stage.

Suggested Citation

  • Graham Bird, 1988. "Balance of Payments Policy in Developing Countries," Palgrave Macmillan Books, in: Managing Global Money, chapter 3, pages 18-60, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-09588-9_3
    DOI: 10.1007/978-1-349-09588-9_3
    as

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