Some Critical Issues in Development Financing for the Low- and Middle-Income Countries with a Special Reference to Selected Islamic Countries

This chapter is devoted to the analysis of certain principal macroeconomic relations on industrial development in the low- and middle-income countries. The terminologies, low- and middle-income countries, are in accordance with the World Bank categories. The low-income countries comprise 43 countries whose per capita GDP did not exceed $410 in 1980. The middle-income countries are the other developing countries excluding the capital-rich oil exporters. The least developing countries (LDCs) are a subset of the low-income countries. In this chapter our study is focused on the entire low- and middle-income countries as two groups. It is hoped that this will lead to some generalised quantitative policy analysis applicable to particular countries. In the first part of the chapter certain linear economic relations are estimated for the low- and middle-income countries. The purpose of this econometric part of the study is to explain the critical relationships among the variables — gross domestic product, capital expenditures, employment, exports and external flow of resources, for the two groups of countries. In the second part of this chapter we show that the economic analysis of the relationships that evolves out of the empirical study leads to substantive policy analysis on industrial development of the low- and middle-income countries.