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The Transfer Problem in Small Open Economies: Exchange Rate and Fiscal Policies for Debt Service

In: Fiscal Issues in Adjustment in Developing Countries

Author

Listed:
  • Dani Rodrik

    (Harvard University
    Centre for Economic Policy Research
    National Bureau for Economic Research)

Abstract

Since the onset of the debt crisis in 1982, the requirement of prompt debt service has overwhelmed many other traditional objectives of government policy in highly-indebted countries. The virtual halt in commercial bank lending has reversed the sign of net resource inflows to these countries, necessitating the transfer abroad of several percentage points of GDP annually. A reverse transfer of such magnitude has required a retrenchment in domestic expenditures and sharp changes in relative prices, which have proved particularly costly in terms of capital formation and (it would appear) income distribution(1).

Suggested Citation

  • Dani Rodrik, 1993. "The Transfer Problem in Small Open Economies: Exchange Rate and Fiscal Policies for Debt Service," Palgrave Macmillan Books, in: Riccardo Faini & Jaime Melo (ed.), Fiscal Issues in Adjustment in Developing Countries, pages 79-98, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-22790-7_5
    DOI: 10.1007/978-1-349-22790-7_5
    as

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