Economic Stabilization and Debt in Developing Countries: (Ohlin Lectures)

Drawing on preliminary results from a massive study conducted by the World Bank to probe the links between stabilization and growth, Cooper examines the experience of developing countries faced by the oil shocks of the 1970s and the debt crisis of the 1980s. He points out that a global slowdown in growth has shifted the main economic concern in developing countries from long-term growth to stabilization and adjustment. Cooper takes into account the cross-country variables that influence the degree to which a country is affected negatively or positively by external shocks and covers such topics as political organization and external debt resolution. The first chapter focuses on countries that experienced adverse shocks from the sharp increase in oil prices beginning in 1974. It also addresses countries that should have benefited from the oil price increase, and from a comparable increase in coffee prices, for which events turned out to be less favourable than they seemed. The second chapter analyzes the "disabsorption" a country faces when it can no longer rely on foreign lending or advantageous terms of trade; it also looks at inflationary pressures and at the role of the International Monetary Fund in designing stabilization programs for its member countries. The third chapter discusses the main influences on a country's economic performance and also discusses the lessons offered for successful stabilization and long-term growth. Moving from individual developing nations to the world economic system, the final two chapters examine the question of external debt and why it has proved to be such an international stumbling block, offering suggestions on how it might be resolved.

Table of Contents:
Part 1 How Countries coped with external disturbances: the first oil shock; impact of an oil price increase; country responses; external borrowing; the second oil shock; country responses; an export boom - oil; an export boom - coffee. Part 2 Economic retrenchment in theory and practice: analysis of economic retrenchment; financing government; the role of the International Monetary Fund. Part 3 Generalizations and lessons: economic performance in the 1980s; reasons for disparate performance; stabilization and growth; what lessons can we learn?; general observations. Part 4 The lingering problem of developing-country debt origins: a brief status report; how did we get into the debt crisis?; historical and domestic solutions. Part 5 The lingering problem of debt - proposed solutions: the Baker plan and the Brady initiative; the Kenen proposal; prospects for the future.

About the Author :
Richard N. Cooper is Maurits C. Boas Professor of International Economics at Harvard University.