Working Paper: NBER ID: w2226
Authors: jeffrey d sachs
Abstract: The search for "growth-oriented adjustment programs" reflects a widespread malaise concerning IMF stabilization programs in countries suffering from external debt crises. A new orthodoxy is emerging from this search, which links recovery in the debtor countries to a shift to "outward-oriented" development, based on trade liberalization. This paper describes many important limitations of this new orthodoxy. The heavy emphasis on liberalization is a historical, and indeed runs contrary to the experiences of the successful East Asian economies. It also distracts attention from more pressing needs of the debtor economies.
Keywords: trade; exchange rate; growth; adjustment programs
JEL Codes: F34; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade liberalization (F13) | economic recovery (E65) |
| exchange rate depreciation (F31) | economic recovery (E65) |
| trade liberalization (F13) | increased exports (F10) |
| increased exports (F10) | more output (E23) |
| increased exports (F10) | employment (J68) |
| trade liberalization (F13) | foreign exchange for debt servicing (F34) |
| liberalization undermines stabilization efforts (F69) | postpones resolution to debt crises (F34) |
| balanced fiscal policy and stable inflation rates (E63) | sustainable growth (O44) |