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External Financing For Development And International Financial Instability

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  • Jan KREGEL

Abstract

The net transfer of resources from developed to developing countries has long been at the centre of the development strategy promoted by the United Nations. However, the long-term historical trend has been just the opposite and has become more pronounced with increased private international capital flows. This paper uses theoretical analysis based on the work of Domar and Minsky to derive the conditions under which positive net resource transfers are compatible with international financial stability and notes that since this condition is equivalent to a Ponzi scheme stability can only be temporary. Since the response to instability is a reversal of net resource flows this explains why sustained positive net flows have been so difficult to achieve.

Suggested Citation

  • Jan KREGEL, 2004. "External Financing For Development And International Financial Instability," G-24 Discussion Papers 32, United Nations Conference on Trade and Development.
    • Handle: RePEc:unc:g24pap:32
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    File URL: https://unctad.org/system/files/official-document/gdsmdpbg2420048_en.pdf
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    Cited by:

    1. Anna M. Carabelli & Mario A. Cedrini, 2010. ">i>Indian Currency>/i> and beyond: the legacy of the early economics of Keynes in the times of Bretton Woods II," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 33(2), pages 255-280, January.
    2. Devin Thomas Rafferty, 2017. "“In Case of Emergency, Break-Open Glass†: The IMF’s “New†Institutional View, Financial Instability, and Financing Development Processes," Review of Radical Political Economics, Union for Radical Political Economics, vol. 49(4), pages 543-550, December.
    3. Wolfgang Drechsler, 2009. "Towards the Law & Economics of development: Ragnar Nurkse (1907–1959)," European Journal of Law and Economics, Springer, vol. 28(1), pages 19-37, August.
    4. Alicia Girón, 2006. "Macroeconomía, desarrollo y género," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 8(15), pages 207-225, July-Dece.
    5. Yan Liang, 2007. "Does Foreign Direct Investment Provide Desirable Development Finance? The Case of China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(2), pages 104-120, March.
    6. Rekiso, Zinabu Samaro, 2020. "Trade deficits as development deficits: Case of Ethiopia," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 344-353.
    7. Jan Kregel, 2007. "Rethinking debt sustainability in the context of the Millennium Development Goals," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 60(242), pages 225-248.
    8. Stefan Angrick, 2018. "Structural conditions for currency internationalization: international finance and the survival constraint," Review of International Political Economy, Taylor & Francis Journals, vol. 25(5), pages 699-725, September.
    9. Ingo Barens & Peter Flaschel & Florian Hartmann & Andreas Röthig, 2010. "Kaldorian boom-bust cycles in the housing market," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 7(2), pages 361-375.
    10. Krishnakumar S, 2015. "Global Imbalances and Bretton Woods II Postulate," Working Papers id:6567, eSocialSciences.
    11. Hilary Tinotenda Muguto & Lorraine Rupande & Paul-Francois Muzindutsi, 2019. "Investor sentiment and foreign financial flows: Evidence from South Africa," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 473-498.
    12. Joerg Mayer, 2017. "How Could the South Respond to Secular Stagnation in the North?," The World Economy, Wiley Blackwell, vol. 40(2), pages 314-335, February.
    13. Rainer Kattel & Leonardo Burlamaqui, 2016. "Development Theory: Convercence, Catch-Up Or Leapfrogging And Finance ?," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 073, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    14. Yilmaz AKYüZ, 2005. "Reforming The Imf: Back To The Drawing Board," G-24 Discussion Papers 38, United Nations Conference on Trade and Development.
    15. Mario Tonveronachi & Elisabetta Montanaro, 2009. "Some preliminary proposals for re-regulating financial systems," Department of Economics University of Siena 553, Department of Economics, University of Siena.
    16. D Aparicio & G Rivera & M Meireles, 2023. "Latin America post-pandemic: debt, financial instability, and uneven economic recovery," Economic Issues Journal Articles, Economic Issues, vol. 28(1), pages 5-19, March.
    17. Nicolás Zeolla & Florencia Médici, 2022. "Desregulación, endeudamiento y fragilidad financiera externa: un enfoque minskiano para la crisis argentina 2018-2019," Ensayos de Economía 20592, Universidad Nacional de Colombia Sede Medellín.
    18. Erik S. Reinert, 2009. "The Terrible Simplifers: Common Origins of Financial Crises and Persistent Poverty in Economic Theory and the new ‘1848 Moment’," Working Papers 88, United Nations, Department of Economics and Social Affairs.
    19. Hugh Whittaker, 2017. "Premature financialization: a conceptual exploration," Working Papers halshs-01680406, HAL.

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