Year:    1978

Author:    Voigt, Fritz, Grunwald, Jorg-Günther

Credit and Capital Markets – Kredit und Kapital, Vol. 11 (1978), Iss. 3 : pp. 399–421

Abstract

On the Monetary Situation of the Developing Countries. Possibilities and limits of Stabilization

The monetary problem of the developing countries lies in the now already chronic balance-of-payments deficits. Their chief determinants are of both a structural nature (e. 8. monocultures, complementary structures, inadequate infrastructure) and a monetary nature (e.8. inflationary trend). On account of the only limited available stock of currency reserves, the need to adjust and restore foreign trade equilibrium is becoming ever more urgent. In this connection, a fundamental distinction must be drawn between: - long-range possibilities of stabilization, e.g. transfer of technology to developing countries, strengthening of their export capacity to improve the infrastructure, generation of “trust“ that permits private investors to import capital and re-invest profits in the country, etc., and - short-range possibilities of stabilization, which are suitable only for bridging momentary balance-of-payments difficulties and therefore must not replac.ea long-range restructurization process in the developing countries (but also in the industrial countries). These possibilities include in particular the credit facilities of the IMF, the allocation of special drawing rights (and their link with development aid), the role of the exchange rate, the formation of raw material producers cartels and, lastly, the methods proposed for export price and export earnings stabilization. The report reaches the conclusion that in international monetary policy - despite the many possibilities available for short-term remedying of liquidity' bottlenecks - only symptoms will be treated as long as countries with chronic deficits have not been completely integrated into the overall economic process. At present, solutions are still often frustrated by “technical and economic operationality” and “political acceptance” of the proposed reform efforts. Hence, there will continue to be more or less strong monetary turbulencein the future, too.