Fiscal aspects of developing countrydebt problems and debt and debt-service reduction operations : a conceptual framework

The causes and implications of the developing country debt crisis - as well as its solution - all have an important fiscal dimension. The crisis was triggered by the widespread perception that the public sectors in many heavily indebted countries were effectively insolvent in the international environment of the early 1980s. The actual fiscal response to the resulting liquidity crisis involved increased reliance on domestic financing, the inflation tax, and the curtailment of public investment. This created adverse adjustment incentives for policymakers and resulted in credit rationing, capital flight, assumption of private external claims by the public sector, and poor domestic investment performance. Solutions involve restoring fiscal health through a combination of debt relief and efficient fiscal adjustment, aimed at mitigating the burden associated with public sector debt service and minimizing the liquidity problems facing the indebted public sector. The debt and debt-service reduction (DDSR) programs implemented so far under the Brady Plan have provided only partial solutions, closing without eliminating the gap between the face value of the external debt and the present value of prospective public sector debt service. They have done so partly by reducing the former and partly by increasing the latter. Their contribution toward easing the immediate liquidity problems of the debtors has not been encouraging. The amount of debt relief embodied in Brady Plan programs enacted so far has not in itself been sufficient to restore fiscal solvency. Better-quality fiscal adjustment could greatly help improve the situation. The most important potential contribution of such programs, then, may have been the reduction - through the policy conditionality associated with resources provided by the international financial institutions - of the secondary burden associated with the internal transfer of resources to the public sector.Banks&Banking Reform,Public Sector Economics&Finance,Environmental Economics&Policies,Economic Theory&Research,Strategic Debt Management

Capital mobility in developing countries : some measurement issues and empirical estimates

An economy's financial integration with the outside world (the extent of capital mobility across its borders) is a key determinant of some of its most important macroeconomic properties. Yet little is known about this characteristic of many developing economies. An important stumbling block in the empirical assessment of financial integration (openness) is the many approaches to measuring it. The author describes and evaluates different tests of capital mobility, surveys existing evidence, and applies four tests of capital mobility - to assess the degree to which the many developing countries tested have achieved integration with the world financial markets. The four tests are the: (1) magnitude of gross capital flows; (2) uncovered interest rate parity; (3) strength of saving-investment correlations; and (4) behavior of domestic consumption over time. The evidence suggests that most developing countries can be considered to be financially open - in only 18 of the 57 developing countries classified did the data fail to show financial openness - and that many countries may be experiencing an increased degree of integration with world financial markets.Economic Theory&Research,Macroeconomic Management,Banks&Banking Reform,International Terrorism&Counterterrorism,Environmental Economics&Policies

Real Exchange Rates, Saving and Growth: Is there a Link?

The view that policies directed at the real exchange rate can have an important effect on economic growth has been gaining adherents in recent years. Unlike the traditional “misalignment" view that temporary departures of the real exchange rate from its equilibrium level harm growth by distorting a key relative price in the economy, the recent literature stresses the growth effects of the equilibrium real exchange rate itself, with the claim being that a depreciated equilibrium real exchange rate promotes economic growth. While there is no consensus on the precise channels through which this effect is generated, an increasingly common view in policy circles points to saving as the channel of transmission, with the claim that a depreciated real exchange rate raises the domestic saving rate -- which in turn stimulates growth by increasing the rate of capital accumulation. This paper offers a preliminary exploration of this claim. Drawing from standard analytical models, stylized facts on saving and real exchange rates, and existing empirical research on saving determinants, the paper assesses the link between the real exchange rate and saving. Overall, the conclusion is that saving is unlikely to provide the mechanism through which the real exchange rate affects growth.real exchange rate, saving, growth

Real exchange rates, saving and growth : is there a link ?

The view that policies directed at the real exchange rate can have an important effect on economic growth has been gaining adherents in recent years. Unlike the traditional"misalignment"view that temporary departures of the real exchange rate from its equilibrium level harm growth by distorting a key relative price in the economy, the recent literature stresses the growth effects of the equilibrium real exchange rate itself, with the claim being that a depreciated equilibrium real exchange rate promotes economic growth. While there is no consensus on the precise channels through which this effect is generated, an increasingly common view in policy circles points to saving as the channel of transmission, with the claim that a depreciated real exchange rate raises the domestic saving rate -- which in turn stimulates growth by increasing the rate of capital accumulation. This paper offers a preliminary exploration of this claim. Drawing from standard analytical models, stylized facts on saving and real exchange rates, and existing empirical research on saving determinants, the paper assesses the link between the real exchange rate and saving. Overall, the conclusion is that saving is unlikely to provide the mechanism through which the real exchange rate affects growth.Macroeconomic Management,Economic Stabilization,Debt Markets,Emerging Markets,Currencies and Exchange Rates

The surge in capital inflows to developing countries : prospects and policy response

After being excluded from world capital markets during the debt crisis, many developing countries have experienced large capital inflows in the past five years. The challenges these inflows pose for domestice policy have generated a substantial literature. The authors review and extend that literature. They characterize the new inflows, assess their causes and the likelihood of sustainability, analyze the policy issues they raise, and evaluate the possible policy responses. Their conclusions tie desirable policy responses to characteristics of both the flows themselves and to those of the recipient economy. Regarding the forces driving the current episode, they conclude that generally, the role of foreign interest rates as a"push"factor driving capital inflows and determining their magnitude has been well-established. On the other hand, country creditworthiness has helped determine both the timing and destination of the new capital flows. Even if creditworthiness is maintained, the early level of inflows is unlikely to be sustained. The pace of reduction in flows to countries that have been receiving them since the early 1990s depends on the path of foreign interest rates and the role of stock adjustment. But a loss of creditworthiness caused by a deterioration in domestic policy would stop inflows quickly and, depending on the circumstances, inflows may be replaced by substantial outflows and an outright balance of payments crisis.What are the implications for policy in recipient countries? Briefly, the receipt of capital inflows may strengthen the case for removing macroeconomic distortions, either because such inflows aggravate the cost ofsuch distortions or because they ease the constraints that originally motivated their adoption. While direct intervention may not be feasible (because controls may be easily evaded), controls may sometimes be a second-best policy. To the extent that capital inflows are permitted to materialize, the desirability of foreign exhcange intervention depends on what is required for macroeconomic stability. Sterilized foreign exchange intervention to prevent overstimulation of demand with a fixed exchange rate may not be feasible or effective. A commensurate reduction in the money multiplier, achieved by increasing reserve requirements, may also have limited effects. The effectiveness of both measures depends on the structure of the domestic financial system. If domestic monetary expansion is not avoided, or if an expansionary financial stimulus is transmitted outside the banking system, the stabilization of total demand will require fiscal contraction.International Terrorism&Counterterrorism,Capital Markets and Capital Flows,Economic Theory&Research,Fiscal&Monetary Policy,Banks&Banking Reform,Economic Theory&Research,Macroeconomic Management,Banks&Banking Reform,Environmental Economics&Policies,International Terrorism&Counterterrorism

A thermal‐gradient approach to variable‐temperature measurements resolved in space

Peer Reviewedhttps://deepblue.lib.umich.edu/bitstream/2027.42/155923/1/jcr2te5056.pd

Morphotype of bacteroids in different legumes correlates with the number and type of symbiotic NCR peptides

In legume nodules, rhizobia differentiate into nitrogen-fixing forms called bacteroids, which are enclosed by a plant membrane in an organelle-like structure called the symbiosome. In the Inverted Repeat-Lacking Clade (IRLC) of legumes, this differentiation is terminal due to irreversible loss of cell division ability and is associated with genome amplification and different morphologies of the bacteroids that can be swollen, elongated, spherical, and elongatedbranched, depending on the host plant. In Medicago truncatula, this process is orchestrated by nodule-specific cysteine-rich peptides (NCRs) delivered into developing bacteroids. Here, we identified the predicted NCR proteins in 10 legumes representing different subclades of the IRLC with distinct bacteroid morphotypes. Analysis of their expression and predicted sequences establishes correlations between the composition of the NCR family and the morphotypes of bacteroids. Although NCRs have a single origin, their evolution has followed different routes in individual lineages, and enrichment and diversification of cationic peptides has resulted in the ability to impose major morphological changes on the endosymbionts. The wide range of effects provoked by NCRs such as cell enlargement, membrane alterations and permeabilization, and biofilm and vesicle formation is dependent on the amino acid composition and charge of the peptides. These effects are strongly influenced by the rhizobial surface polysaccharides that affect NCR-induced differentiation and survival of rhizobia in nodule cells

The complete mitochondrial DNA sequence of the pantropical earthworm Pontoscolex corethrurus (Rhinodrilidae, Clitellata): Mitogenome characterization and phylogenetic positioning

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