balasa o f y adjustment policies in developing...

World Bank Reprint Series: Number 312 REP-312

B3ela Balasa & -ePr, / o f y

Adjustment Policiesin Developing CountriesA Reassessment

Reprinted wifi pemrmssion from V*brUS Dveopment, vol. 12, no. 9 (September 1984), pp. 955-72.

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No. 276. Sweder van Wijnbergeri, 'Interest Rate Management in LDCs," Journal of MonetaryEconomics

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Alternative Maaoeconomic Specifications," The Quartly Journal of EconomicsNo. 283. Anne 0. Knreger, "Trade Policies in Developing Countries," Handbook of Intenational

EconomicsNo. 284. Anne 0. Krueger and Baran Tuncer, "An Empirical Test of the Infant Industty

Argument," Amerian Economic ReviewNo. 285. Bela Balassa, "Economic Policies in Portugal," EconomiaNo. 286. F. Bourgwgnon, G. MicheL and D. Miqueu, "Short-run Rigidities and Long-run

Adjustments in a Computable General Equilibrium Model of Income Distibution andDevelopment," Journal of Development Economics

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No. 288. Hollis B. Chenery, Interaction between Theory and Observation in Development,"Vibrid Devmpment

No. 289. j. B. Knight and R. H. Sabot, Educational Expansion and the Kuznets Effect," TheAmerican Ecnomic Review

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World Development, Vol. 12, No. 9, pp. 955-972, 1984. 0305/750X184 $3.00 + 0.00Printed in Great Britain. © 1984 Pergarnon Press Ltd.

Adjustment Policies in Developing Countries:A Reassessment

BELA BALASSA*

Johns Hopkins University, Baltimore,and the World Bank, Washington, D.C.

Summary. - This paper analyses policy responses to external shocks by developing countriesin the 1974-76 and 1979-81 periods. It is shown that outward-oriented economies reliedlargely on output-increasing policies of export promotion and import substitution to offsetthe balance-of-payments effects of external shocks in both periods and accepted a temporarydecline in the rate of economic growth in order to limit their external indebtedness. In turn,inward-oriented economies failed to apply output-increasing policies of adjustment. Theyfinanced the balance-of-payments effects of extetnal shocks by foreign borrowing in the1974-76 period, and had to take deflationary measures in 1979-81 as their increased indebted-ness limited the possibilities for further borrowing. The policies applied led to substantiallyhigher rates of economic growth in outward-oriented than in inward-oriented economies, withthe dffferences in growth rates offsetting the differences in the size of extemal shocks severaltimes.

1. ANALYSING ADJUSTMENT POLICIES manufacturing share in GDP of 20% in 1977,IN DEVELOPING ECONOMIES and 12 less developed countries, which range

between the newly industrializing and the(a) Introduction least developed economies.

Among newly-industrializing economies,In an earlier study, the author analysed Korea, Singapore and Taiwan adopted an

policy responses to external shocks in the outward-oriented development strategy, pro-1974-78 period in developing economies viding similar incentives to sales in domesticclassified according to the character of these and foreign markets, in the early 1960s andshocks, the level of industrialization and trade continued with this strategy after 1973. Theypolicy.' In the present paper, the experience were joined by Chile and Uruguay, which hadof the 1973-76 and 1979-81 periods of external previously applied an inward-oriented strategyshocks will be compared for the same group but turned outward following the externalof economies. * shocks of 1974-75. In turn, after earlier efforts

External shocks have been defined as large, made to reduce the bias in the incentive systemunanticipated changes in world economic against exports, Brazil, Israel, Portugal andconditions. They include shifts in the terms of Yulgoslavia again increased the degree of inwardtrade, associated to a considerable extent with *The author is Professor of Political Economy at theincreases in oil prices, and the slowdown in Johns Hopkins University and Consultant to thethe growth of world export demand, associated World Bank. He is indebted to participants of awith world recessions. In the second period, session at the Annual Meetings of the Americanincreases in interest rates in world financial Economic Association, held in San Francisco inmarkets may also come under this heading. December 1983, and at a colloquium for World

The investigation covers 28 developing Bank Executive Directors, held in Germantown ineconomies, of which 24 suffered unfavourable February 1984, for helpful comments and suggestions.external shocks in the 1973-78 period while Further thanks are due to Shigeru Akiyama, Ericthe remaining four, on balance, benefited from Mares and Nadeem Burney for valuable research

assistance and to Gholan Azarbayejani for prepara-the external shocks of the period. The first tiont of the computer program used in the calculations.group includes 12 newly-industrializing eco- The author alone is responsible, however, for thenomies, defined as having per capita incomes contents of the paper that should not be assumedbetween $1100 and $3500 in 1978 and a toreflect the views of the World Bank.

955

956 WORLD DEVELOPMENT

orientation whereas Argentina, Mexico and increases in interest rates, as well as the effectsTurkey maintained their relatively inward- of policy responses to these shocks in theoriented stance during the first period of form of reliance on additional net externalexternal shocks. Finally, external shocks were financing, export promotion, import sub-aggravated by internal shocks in the form of stitution. and macroeconomic policies. Theexcessively expansionary policies in the mid- base year for the calculations pertaining to1970s in Argentina and Mexico and the April the 1974-76 period remains '1972' (the average1974 Revolution in Portugal. for the years 1971-73); it is '1977' (the average

Among less developed countries, Kenya, for the years 1976-78) for the 1979-81 period.Mauritius, Thailand and Tunisia may be classifiedas having applied outward-oriented develop-ment strategies while the remaining eight (b) External shockscountries followed an inward-oriented strategy.Within the latter group, Jamaica, Peru and The balance-of-payments effects of externalTanzania experienced internal shocks in the shocks have been derived by postulating aform of economic disruptions due to drastic situation that would have existed in the absenceshifts in domestic policies during the 1974-76 of such shocks. Terms of trade effects haveperiod; such was not the case in the other five been estimated as the difference between thecountries of the group (Egypt, India, Morocco, current price values of exports and importsthe Philippines and Zambia). and their constant price values, estimated in

L|he classification scheme has been estab- the prices of the relevant base period. Theylished on the basis of the policies applied in have further been decomposed into a 'purethe 1974-78 period. Policy changes have terms of trade effect', calculated on the assump-occurred in several countries since. Among tion that the balance of trade expressed innewly-industrializing economies, Portugal base year prices was in equilibrium, and anapplied a stabilization programme in 1978, 'unbalanced trade effect', indicating the impactTurkey undertook a far-reaching policy reform of the rise of import prices on the deficitin January 1980, while Chile and Uruguay (surplus) in the balance of trade, expressed inintroduced considerable distortions in the base year prices.system of incentives by fixing their exchange The balance-of-payments effects of therates in 1980-81. Among less developed coun- slowdown of foreign demand on the exportstries, Jamaica and Peru carried out policy of the less developed countries, or exportreforms towards the end of 1980. Nevertheless, volume effects, have been estimated as thein order to ensure comparabilityin the results, difference between the trend value of exportsthe earlier country classification scheme has and hypothetical exports. The trend value ofbeen retained for purposes of the present exports has been derived on the assumptionstudy. At any rate, given the time lags involved, that the growth rate of foreign demand forthe policy changes appear to have had little the country's traditional export products andeffect before the end of the second period of for the exports of fuels, non-traditional primaryexternal shocks, the exceptions being Portugal commodities, and manufactured goodsand Turkey. remained the same as in the 1963-73 period

Among the three countries that experienced and that the country concerned maintainedfavourable external shocks in the 1974-78 its base year share in these exports. In turn,period, higher oil prices benefited Indonesia hypothetical exports have been derived on theand Nigeria and higher coffee prices, Colombia assumption that the country maintained itsand the Ivory Coast. With the decline in coffee base year share in the foreign imports of theseprices, Colombia and the Ivory Coast suffered products and product groups during the periodunfavourable external shocks in 1979-81 while under consideration.the emerging new exporters of petroleum, Finally, the balance-of-payments effects ofMexico and Peru, experienced favourable increases in interest rates have been estimatedshocks. Again, for reasons of comparability, the as the difference between actual net interestearlier classification scheme has been retained. payments and the payments that would have

The methodology applied is the same as that been made if interest rates remained at '1977'employed in the previous study. It involves levels. The calculation has been made byestimating the balance-of-payments effects of utilizing London Eurodollar rates for one yearexternal shocks, resulting from changes in the deposits. These rates averaged 6.83% in '1977';terms of trade and the slowdown of foreign they were 11.71% in 1979, 13.44% in 1980demand for exports, and, in the second period, and 16.05% in 1981.2

ADJUSTMENT POLICIES IN DEVELOPING COUNTRIES 957

(c) Adjustment policies and imports (average trade) and to the grossnational product, export volume effects to

The balance-of-payments effects of adjust- exports and to the gross national product,ment policies have also been estimated by and interest rate effects to the gross nationalhypothesizing a situation that would have product, all expressed in base period prices.existed in the absence of external shocks. The following discussion will concentrate onHowever, the methodology applied does not results obtained for country groups.permit separating the effects of policy changesundertaken in response to external shocks fromthose of autonomous policy changes that may (a) Terms of trade effectsthemselves constitute an internal shock. Thedistinction between the two necessarily becomes In the 24 developing economies experiencinga matter of interpretation. unfavourable external shocks in 1974-76,

* Additional net external financing has been adverse terms of trade effects averaged 4.2%derived as the difference between the actual of GNP in 1974-76 and 3.3% in 1979-81.merchandise trade balance and the trade Within these totals, there was an increase inbalance that would have obtained if trends in pure terms of trade effects from 1.8 to 2.2%,imports and exports observed in the 1963-73 and a decline in unbalanced trade effects fromperiod continued and the prices of exports and 2.4 to 1.1 % of GNP.imports remained at their base year level. The results for the two periods reflectNon-factor services and private transfers do not increases in oil prices and decreases in otherenter into the calculations as they are assumed primary product prices, relative to the pricesto be unaffected by external shocks, except of manufactured goods. T he decline in thefor the 1979-81 period when the financing prices of non-fuel primary products was par-of increases in interest payments has been ticularly pronounced in 1979-81, contributingseparately estimated. to the deterioration of the pure terms of trade

The effects of export promotion have been of less developed economies during this period.calculated as changes in exports resulting from Nor did these economies experience anchanges in the country's base year export im[provement in their unbalanced trade effects,market shares. In turn, import substitution has so that their overall terms of trade deterioratedbeen defined as savings in imports associated between 1974-76 and 1979-81. In turn, thewith a decrease in the income elasticity of adverse terms of trade effects declined inimport demand for the fuel and non-fuel newly-industrializing economies, where theimports of the country concerned, compared deterioration of the pure terms of trade waswith the 1963-73 period. Finally, the effects morethanoffsetbyiimprovementsinunbalancedof macroeconomic policies on imports have trade effects.been estimated by taking the difference between In both periods, terms of trade losses wereactual GNP growth rates and the growth rate much greater in outward-oriented than inof the 1963-73 period and assuming unchanged inward-oriented econoniies, owing largely toincome elasticities of import demand. differences in pure terms of trade effects as

unbalanced trade effects were of similar magni-tude in the two cases. The differences in theresults are explained by the substantially higher

2. THE BALANCE-OF-PAYMENTS shLare of foreign trade in GNP under outwardEFFECTS OF EXTERNAL SHOCKS orientation (28% in 1 974-76 and 39% in 1979-

81) than under inward orientation (9 andThis section of the paper presents estimates 10%). In fact, terms of trade losses were a

of the balance-of-payments effects of external srnaller proportion of the average value of tradeshocks for groups of the 28 developing eco- in outward-oriented than in inward-orientednomies studied. Summary results are provided economies.for individual countries in Table 1 and for These conclusions also apply if newly-country groups in Table 2. In turn, Table 3A industrializing and less developed economiesreports the estimated terms of trade, export are separately considered. 3 Furthermore,volume and, for the second period, interest outward-oriented NICs and LDCs experiencedrate, effects for individual years as well as less favourable developments in their pureaverage results forthe 1974-76andthe 1979-81 terms of trade between 1974-76 and 1979-81periods, and Table 3B relates terms of trade than the corresponding inward-oriented groups.effects to the average of merchandise exports Finally, countries with favourable external

%DoLA

Table 1. External shocks and policy responses: Summary results for developing economies

Pure unbalanced total Export External Interest Additional Effectsvolume shocks rate net external Export Import of lower

Terms of trade effects effects total effects Together financing promotion substitution GDP growth

As a percentage of GNP As a percentage of external shocks*C

Israel 74-76 2.0 8.5 10.5 1.2 11.6 - 11.6 75.3 -25.1 19.0 30.879-81 7.4 3.3 10.7 3.0 13.7 2.4 16.1 20.2 -8.9 16.9 71.8 t

Singapore 74-76 -18.5 34.9 16.4 3.7 20.2 - 20.2 87.1 -3.9 -34.0 50.6 z79-81 -1.4 19.3 17.9 14.4 32.3 2.1 34.4 36.6 87.5 -53.3 29.3

Yugoslavia 74-76 2.9 5.5 8.4 1.8 10.2 - 10.2 71.2 -4.1 35.0 -2.2 <79-81 2.2 2.8 4.9 0.7 5.6 1.1 6.8 50.2 -5.6 24.2 31.3 t-

Argentina 74-76 1.7 -0.9 0.8 0.1 0.9 - 0.9 154.8 -141.6 40.5 46.2 1079-81 1.5 -0.1 1.4 0.1 1.5 1.4 2.9 322.0 -68.1 -201.3 47.3 ;

Portugal 74-76 3.1 8.6 11.8 1.3 13.0 - 13.0 52.5 43.4 42.1 48.879-81 -3.0 4.7 1.6 1.8 3.4 2.0 5.4 58.3 42.2 -196.3 195.6

Uruguay 74-76 8.4 -2.7 5.7 0.9 6.6 - 6.6 61.6 30.3 29.7 -21.679-81 8.4 0.1 8.5 1.0 9.5 0.8 10.3 98.9 4.3 71.4 -74.8

Brazil 74-76 1.6 1.9 3.5 0.4 3.9 - 3.9 82.6 12.4 19.8 -14.879-81 2.8 -0.6 2.2 0.3 2.4 1.7 4.2 -33.5 38.4 46.2 49.0

Chile 74-76 13.8 -10.2 3.6 0.4 4.0 - 4.0 -113.1 100.3 20.4 92.279-81 0.4 2.6 3.0 1.1 4.1 3.2 7.3 237.8 60.1 -128.0 -69.8

Taiwan 74-76 8.8 -1.9 6.9 2.4 9.3 - 9.3 27.7 -12.0 16.4 68.079-81 16.1 -7.9 8.3 5.2 13.5 0.1 13.6 -36.8 26.0 89.8 21.0

Mexico 74-76 -0.8 2.1 1.3 0.3 1.6 - 1.6 177.6 -59.0 -19.3 0.879-81 -2.9 1.9 -1.0 0.6 -0.5 2.3 1.9 315.4 562.4 -904.5 -73.3

Turkey 74-76 1.2 5.9 7.1 0.4 7.5 - 7.5 120.2 -3.9 -11.2 -5.279-81 2.9 2.0 4.9 0.2 5.1 1.3 6.4 -11.0 10.9 52.1 48.0

Korea 74-76 8.8 2.0 10.8 1.7 12.5 - 12.5 -32.3 55.7 89.9 -13.379-81 6.1 1.5 7.5 3.7 11.2 2.6 13.8 -15.9 -4.8 13.1 107.6

Jamaica 74-76 3.3 6.5 9.8 3.8 13.6 - 13.6 7.3 -9.9 38.4 64.279-81 15.2 2.1 17.3 12.7 30.0 5.5 35.5 44.2 -26.7 21.2 61.3

Tunisia 74-76 -8.1 11.0 2.9 2.4 5.3 -- 5.3 211.3 29.1 -118.5 -21.979-81 -8.2 5.9 -2.3 3.7 1.4 1.1 2.8 274.2 312.4 -452.8 -33.8

Colombia 74-76 -0.0 0.2 0.2 0.8 0.9 - 0.9 142.7 2.1 -40.6 -4.279-81 4.3 0.2 4.4 0.0 4.5 0.5 5.0 149.1 53.0 -102.3 0.2

Ivory Coast 74-76 -4.3 -1.6 -5.9 3.9 -2.0 - -2.0 -226.5 273.5 -179.6 32.679-81 6.2 -2.2 4.0 1.6 5.6 2.3 7.9 7.7 26.8 28.2 37.3

Mauritius 74-76 -9.5 11.2 1.7 2.5 4.2 - 4.2 147.1 47.1 176.5 -264.779-81 7.3 4.0 11.3 4.9 16.3 1.7 17.9 57.8 1.4 42.2 -2.0

Peru 74-76 0.3 2.2 2.5 1.1 3.6 - 3.6 199.2 -39.8 -54.9 -4.5 >79-81 -1.0 -1.1 -2.1 1.0 -1.1 2.4 1.3 -459.1 400.7 -74.5 32.9

Morocco 74-76 -6.3 8.1 1.8 1.0 2.8 - 2.8 356.7 -51.1 -156.7 -48.979-81 2.7 4.1 6.8 1.2 8.0 2.1 10.1 8.9 11.3 62.0 17.8 uz

Nigeria 74-76 -67.3 8.8 -58.5 4.7 -53.8 - -53.8 -60.6 -3.8 -34.4 -1.2 379-81 -12.4 1.3 -11.1 7.3 -3.9 -0.3 -4.1 -227.7 -28.5 27.7 128.5

Philippines 74-76 3.8 4.0 7.8 1.6 9.4 - 9.4 122.1 -2.0 -14.3 -5.8 Z79-81 1.8 2.4 4.2 2.0 6.2 1.3 7.5 71.5 46.6 --11.7 -6.4 3

Thailand 74-76 0.5 3.4 3.9 0.6 4.5 - 4.5 8.2 30.3 52.1 9.4 o79-81 3.0 2.7 5.7 0.1 5.8 1.4 7.2 78.7 39.7 -38.3 19.9 r

Zambia 74-76 16.6 -12.9 3.8 0.5 4.3 - 4.3 22.5 -71.9 138.2 11.2 )79-81 7.6 -5.5 2.1 3.6 5.7 4.6 10.3 82.7 -69.3 -7.9 93.7 tT

Egypt 74-76 -2.4 8.5 6.1 1.3 7.4 - 7.4 296.6 -25.2 -177.7 6.379-81 -1.2 6.2 5.0 0.8 5.8 1.1 6.9 47.8 -20.1 34.8 37.5 2

Indonesia 74-76 -23.0 1.2 -21.8 2.5 -19.3 - -19.3 -90.3 16.0 -23.9 -1.8 e79-81 -11.9 -1.3 -13.2 5.8 -7.4 0.0 -7.4 -118.6 16.5 7.3 -5.2 t7l

Kenya 74-76 -0.5 7.8 7.3 0.6 7.9 - 7.9 27.6 5.4 45.9 21.179-81 9.7 2.5 12.2 0.7 12.9 0.5 13.4 53.3 -15.8 60.6 1.9 r

Tanzania 74-76 0.5 7.4 7.9 1.6 9.5 - 9.5 93.1 -40.8 37.9 9.8 079-81 8.1 3.1 11.2 0.2 11.4 0.2 11.6 28.6 -15.9 61.0 26.3 -z

India 74-76 2.2 0.3 1.8 0.3 2.1 - 2.1 110.8 -8.6 -2.7 0.479-81 2.0 1.1 3.1 0.4 3.5 -0.2 3.4 152.7 -55.7 1.2 1.7

0Source: World Bank economic and social data base. C*The signs have been reversed for economies that experienced favourable external shocks. Z

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Table 2. External shocks and policy responses: summary results for groups of developing economies

Pure unbalanced total Export External Interest Additional Effectsvolume shocks rate net external Export Import of lower

Terms of trade effects effects total effects Together financing promotion substitution GDP growth

As a percentage of GNP As a percentage of external shocks*

Newly-industrializing 74-76 2.1 2.5 4.6 0.7 5.3 - 5.3 66.1 -1.2 24.4 10.8economies (NICs) 79-81 2.3 0.8 3.1 1.1 4.2 1.8 6.0 21.6 30.9 -3.4 50.9

Less developed 74-76 1.2 2.0 3.2 0.7 3.9 - 3.9 138.3 -10.3 -29.5 1.4economies (LDCs) 79-81 1.9 2.0 3.9 0.9 4.8 0.7 5.5 85.9 -5.4 6.9 12.6

NICs and LDCs 74-76 1.8 2.4 4.2 0.7 4.9 - 4.9 84.7 -3.6 10.5 8.3 079-81 2.2 1.1 3.3 1.1 4.4 1.5 5.9 40.7 20.2 -0.4 39.5 P

Outward-oriented 74-76 7.4 1.0 8.4 1.7 10.0 - 10.0 1.1 31.6 40.4 26.9 rNlCs 79-81 7,5 0.5 8.0 4.5 12.5 1.9 14.3 6.9 29.0 16.6 47.5 0

Outward-oriented 74-76 -1.4 5.6 4.2 1.0 5.1 - 5.1 52.9 24.8 21.9 0.6LDCs 79-81 2.3 3.3 5.6 1.0 6.5 1.2 7.8 76.1 28.8 -15.4 10.5

Outward-oriented 74-76 4.9 2.3 7.2 1.5 8.7 - 8.7 9.7 30.5 37.3 22.5 tnNICsandLDCs 79-81 6.1 1.2 7.3 3.5 10.9 1.7 12.6 18.1 29.0 11.4 41.5 o

Inward-oriented 74-76 1.2- 2.8 4.0 0.5 4.5 - 4.5 91.3 -14.0 18.2 4.5NICs 79-81 1.3 0.9 2.2 0.5 2.6 1.7 4.4 35.3 32.8 -22.0 53.9

Inward-oriented 74-76 1.5 1.5 3.1 0.7 3.8 - 3.8 154.7 --16.9 -39.2 1.5 zLDCs 79-81 1.8 1.8 3.5 0.9 4.4 0.6 5.0 88.6 -15.1 13.3 13.2 <

Inward-oriented 74-76 1.3 2.4 3.7 0.6 4.3 - 4.3 109.6 -14.8 1.6 3.6NICs and LDCs 79-81 1.4 1.1 2.5 0.6 3.1 1.4 4.6 56.0 14.2 -8.3 38.1

NICs with internal 74-76 0.4 1.8 2.2 0.3 2.5 - 2.5 108.6 -60.1 20.1 31.4shocks 79-81 -1.6 1.6 -0.0 0.5 0.5 2.0 2.5 491.3 260.7 -778.8 126.8

LDCs with internal 74-76 0.7 3.4 4.1 1.5 5.7 - 5.7 116.7 -30.8 -5.5 19.6shocks 79-81 2.0 -0.0 2.0 1.7 3.6 2.1 5.7 -49.8 56.0 34.5 59.5

Economieswith 74-76 -19.6 1.9 -17.7 2.0 -15.6 - -15.6 -72.4 5.9 -32.2 -1.2favourable shocks 79-81 -8.4 -0.1 -8.5 5.1 -3.3 0.1 --3.2 -170.1 16.6 -1.7 55.2

Source: World Bank economic and social data base.*The signs have been reversed for the group that experienced favourable external shocks.


shocks made substantial gains through im- period. In both cases, the ratios were higherprovements in their pure terms of trade that for outward-oriented than for inward-orienteddominated the unbalanced trade effects; the eccnomies.improvements were particularly pronouncedin the 1974-76 period when increases in oilprices were larger and coffee prices rose. (d) External shocks combined

For the developing economies studied,terms of trade effects declined between 1974-76

(b) Export volume effects and 1979-81, and were offset only in partby increases in export volume effects. At the

Export shortfalls due to the deceleration of same time, terms of trade effects continuedthe growth of world trade averaged 0.7% of to dominate export volume effects and theGNP in the developing economies studied in latiter were also exceeded by interest rate1974-76 and 1.1% in 1979-81. The rise in the effects in the 1979-81 period.export shortfall suffered by the newly-industri- In 1974-76, the adverse balance-of-paymentsalizing economies was of the same magnitude effects of external shocks were larger in newlywhile smaller increases occurred in the less inclustrializing than in less developed economies.developed economies. The opposite result obtained in 1979-81

At the same time, the adverse export volume as the magnitude of external shocks declinedeffects remained unchanged in the case of in the former, and increased in the latter,inward-oriented developing economies (0.6% group.of GNP) while these effects rose from 1.5 to Within each group, outward-oriented eco-3.5% in outward-oriented countries. The nomies suffered larger external shocks thanincrease of the export shortfall, from 1.7 to inwvard-oriented economies, with the differential4.5%, was especially pronounced in outward- growing over time due to the increasing open-oriented NICs. ness of outward-oriented economies, adverse

The observed differences are explained by changes in world demand for their manu-differences in the product composition of fac tured exports, and the favourable effectsexports and in the share of exports in GNP. of the rise of petroleum prices for Mexico andFor one thing, world trade in manufactured Peru among inward-oriented economies. Ingoods, exported chiefly by outward-oriented turn, the extent of improvement in the balancedeveloping economies and in particular the of payments of countries benefiting fromNICs, held up better than primary product favrourable external shocks declined over time,trade in 1974-76 while the opposite happened in part because of the fall in coffee prices andin 1979-81. Thus, the ratio of the export in part because of the decrease in world demandshortfall to exports rose from 5.7% in 1974-.76 for petroleumsto 9.5% in 1979-81 in outward-orienteddeveloping economies while there was a declinefrom 8.3 to 6.7% in inward-oriented economies. 3. ADJUSTMENT TO EXTERNAL SHOCKSFor another thing, the share of exports inGNP is substantially higher under outward Summary results are reported for individualthan under inward orientation. countries in Table 1 and for country groups in

Among developing countries experiencing Taible 2. In turn, Table 3A shows the balance-internal shocks in 1974-76, export volume of-payments effects of the policies appliedeffects were smaller than the average in the while Table 3B relates the results to the valueNICs and larger than the average in the LDCs of exports, imports, average trade and thein both periods under consideration. Finally, gross national product, as the case may be, allcountries with favourable external shocks expressed in base year prices. Finally, Table 4suffered increasing export shortfalls as world provides information on debt service ratiosdemand for petroleum declined. (net interest payments and amortization,

expressed as a percentage of merchandiseexports) and external debt ratios (the medium-

(c) Interest rate effects and long-term external debt less foreign ex-change reserves, expressed as a percentage of

The ratio of interest rate effects to GNP the gross national product) and Table 5 showswas considerably higher for the newly-industri- rates of economic growth, incremental capital-alizing economies (1.8%) than for the less ouitput ratios, and domestic and foreign savingsdeveloped countries (0.7%) in the 1979-81 ratios.

962 Table 3A. Balance-of-payments effects of external shocks and of policy responses to theseshocks (US$ million)

Average Average1974 1975 1976 1974-76 1979 1980 1981 1979-81

Newly-industrializing economies (NICs)

1. External shocksTermsof trade effects 11822 15300 11143 12755 8644 21723 26202 18856

Pure 3325 7346 6869 5847 2855 i2460 26172 13829Unbalanced 8497 7954 4275 6908 5788 9263 30 5027

Export volumeeffects 397 3319 2025 1914 3337 6466 11044 6949Together, excl. interestrateeffects 12218 18619 13168 14669 11981 28189 37246 25805Interest rate effects 0 0 0 0 5205 9897 17010 10704Total 12218 18619 13168 14669 17186 38086 54256 36509

11. Potcy responsesAdditional netexternal financing 14279 12981 1831 9697 12240 20535 16082 16286Additional net external financing

excl. interestrateeffects 14279 12981 1831 9697 7035 10638 -928 5582lnchease in export market shares -904 -194 556 -181 1921 6094 15939 7985Import substitution -917 3302 8340 3575 106 -1310 -1462 -889EffectsoflowerGNPgrowth rate -239 2530 2442 1578 2918 12767 23697 13128Together, excl. interest rate effects 12218 18619 13168 14669 11981 28189 37246 25805

Outward-oriented NiCs

1. External shocksTermsoftradeeffects 3472 4234 2517 3408 2467 8498 12812 7926

Pure 2302 3427 3295 3008 989 7458 13907 7451Unbalanced 1171 807 -779 400 1479 1041 -1094 475

Exportvolumeeffects -40 1438 676 691 2021 4250 7139 4470Together, excl. interest rate effects 3433 5672 3192 4099 4489 12748 19952 12396Interest rate effects 0 0 0 0 772 1801 2979 1851Total 3433 5672 3192 4099 5261 14549 22931 14247

II. Policy responsesAdditional net external financing 2209 1182 -3252 46 2517 3020 2578 2705Additional net external financing

excl. interest rate effects 2209 1182 -3252 46 1745 1219 -401 854Increasein exportmarket shares 470 940 2479 1296 1350 3241 6187 3593Import substitution 145 1922 2900 1656 1607 1352 3207 2055EffectsoflowerGNPgrowth rate 610 1628 1065 1101 -213 6936 10959 5894Together, excl. interest rate effects 3433 5672 3192 4099 4489 12748 19952 12396

Inward-oriented NICs

1. External uhocksTerms oftrade effects 8349 11066 8626 9347 6176 13224 13389 10930

Pure 1023 3919 3573 2839 1867 5002 12265 6378Unbalanced 7326 7147 5053 6509 4310 8222 1124 4552

Exportvolumeeffects 437 1881 1350 1223 1316 2216 3905 2479Together, excl. interest rate effects 8786 12947 9976 10570 7492 15441 17294 13409Interest rate effects 0 0 0 0 4433 8096 14031 8854Total 8786 12947 9976 10570 11925 23537 31326 22263

11. Policy responsesAdditional net external financing 12070 11799 5083 9651 9724 17515 13504 13581Additional net external financing

excl. interest rate effects 12070 11799 5083 9651 5291 9419 -527 4728Increase in export market share -1374 -1134 -1923 -1477 571 2853 9753 4392Import'substitution -1062 1380 5439 1919 -1501 -2662 -4669 -2944EffectsoflowerGNPgrowth rate -848 902 1376 477 3132 5831 12738 7234Together,excl. interest rate effects 8786 12947 9976 10570 7492 15441 17294 13409

NICs with internal shocks

1. Extermal shocksTermsoftradeeffects 1493 2859 2084 2145 775 753 -1611 -27

Pure -266 629 899 420 18 -3604 -5294 --2960Unbalanced 1760 2230 1185 1725 757 4357 3683 2932

Export volumeeffects 93 607 237 312 365 1035 1615 1005Together, excl. interest rate effects 1587 3466 2321 2458 1141 1787 4 977Interest rate effects 0 0 0 0 1719 3174 6406 3766Total 1587 3466 2321 2458 2860 4961 6410 4744

11. Policy rerponsesAdditional net external financing 2808 3893 1305 2669 3637 10280 11782 8566Additional net external financing

excl. interest rate effects 2808 3893 1305 2669 1918 7106 5376 4800Increase inexport market share -789 -1593 -2051 -1478 1791 2059 3791 2547Import substitution -433 233 1683 494 -3072 -8278 -11477 -7609Effects of lower GNP growth rate 1 934 1384 773 503 901 2314 1239Together, excl. interest rate effects 1587 3466 2321 2458 1140 1787 4 977

Source: World Bank economic and social data base.

963

Average Average Average Average1974 1975 1976 1974-76 1979 1980 1981 1979-81 1974 1975 1976 1974-76 1979 1980 1981 1979-81

Less developed economies (LDCs) NlCs and LDCs

1501 6199 4792 4164 3002 9564 13983 8850 13323 21499 15935 16919 11646 31287 40185 27706-853 2366 3038 1517 1104 3793 7940 4279 2472 9712 9907 7364 3959 16253 34112 181082354 3833 1754 2647 1898 5772 6043 4571 10650 1 1787 6029 9555 7687 15034 6073 9598307 1308 1198 938 1088 1848 3224 2053 '704 4627 3223 2851 4425 8314 14268 9002

1808 7508 5990 5102 4090 11412 17207 10903 14026 26127 19158 19770 16071 39601 54453 367080 0 0 0 957 1283 2554 1598 0 0 0 0 6162 11180 19564 12302

1808 7508 5990 5102 5047 12696 19761 12501 14026 26127 19158 19770 22232 50782 74017 49010

3707 10400 7067 7058 2044 11879 18958 10961 17986 23381 8898 16755 14284 32414 35040 27246

3707 10400 7067 7058 1087 10596 16404 9363 17986 23381 8898 16755 8122 21234 15476 14944-793 -593 -183 -523 428 -1780 -412 -588 -1697 -787 373 -704 2349 4314 15528 7397

-1082 -2323 -1104 -1503 1837 1235 -806 755 -1999 980 7236 2072 1943 -76 -2268 -134-25 23 210 69 739 1361 2022 1374 -264 2553 2652 1647 3657 14128 25719 14501

1808 7508 5990 5102 4090 11412 17208 10903 14(027 26128 19158 19771 16071 39601 54454 36709

Outward-oriented LDCs Outward-oriented NICs and LDCs

298 911 779 663 962 2347 2855 2055 3770 5145 3296 4070 3429 10845 15668 9981-568 -176 71 -224 310 613 1637 853 1734 3251 3367 2784 1299 8071 15544 8304

865 1087 708 887 652 1734 1218 1201 2MM36 1894 -71 1286 2131 2774 124 167650 255 163 156 47 368 637 351 10 1693 839 847 2068 4618 7776 4821

348 1166 942 819 1009 2715 3492 2405 37'80 6838 4134 4918 5498 15463 23443 148010 0 0 0 276 372 712 453 0 0 0 0 1048 2173 3691 2304

348 1166 942 819 1285 3087 4203 2858 3780 6838 4134 4918 6545 17636 27134 17105

292 831 174 433 1115 2948 2789 2284 2:101 2013 -3078 479 3632 5968 5367 4989

292 831 174 433 840 2576 2077 1831 2:501 2013 -3078 479 2584 3795 1676 268580 78 450 203 543 569 964 692 549 1018 2929 1499 1894 3810 7151 42852 233 301 179 -394 -687 -32 -371 146 2155 3202 1834 1213 665 3175 1684

-25 24 16 5 20 257 482 253 584 1653 1082 1106 -193 7192 11441 6147348 1167 942 819 1009 2715 3492 2405 3781 6839 4135 4918 5497 15463 23443 14801

Inward-oriented LDCs Inward-Oriented NICs and LDCs

1203 5288 4013 3502 2040 7218 11128 6795 9553 16354 12640 12849 8216 20442 24517 17725-285 2542 2967 1741 794 3180 6303 3426 738 6461 6540 4580 2661 8182 18569 98041489 2746 1047 1761 1246 4038 4825 3370 8815 9893 6100 8269 5556 12260 5949 7921

257 1053 1035 782 1041 1480 2587 1703 693 2935 2384 2004 2357 3696 6493 41821460 6341 5048 4283 3081 8697 13716 8498 10246 19289 15024 14853 10573 24138 31010 21907

0 0 0 0 681 911 1842 1145 0 0 0 0 5114 9007 15873 99981460 6341 5048 4283 3762 9608 15558 9643 10246 19289 15024 14853 15687 33146 46883 31905

3415 9569 6893 6626 929 8931 16169 8676 15485 21368 11976 16276 10652 26447 29673 22257

3415 9569 6893 6626 248 8020 14327 7532 15485 21368 11976 16276 5538 17439 13800 12259-872 -671 -633 -725 -116 -2349 -1376 -1280 -2246 -1805 -2556 -2202 455 504 8377 3112

-1083 -2556 -1405 -1681 2231 1921 -774 1126 -2145 -1175 4034 238 730 -741 -5444 -18180 -1 193 64 719 1104 1539 1121 -848 901 1570 541 3850 6936 14277 8355

1460 6342 5048 4283 3082 8697 13716 8498 10246 19289 15024 14853 10574 24138 31010 21907

LDCs with internal shocks Economies with favourable shocks

264 876 538 559 -171 402 957 396 -9330 -6143 -8564 -8012 -5461 -16231 -12318 -11337-39 145 180 95 40 413 761 404 -8991 -7254 -10399 -8881 -3032 -15645 -14662 -11180303 731 358 464 -211 -11 197 -8 -339 1111 1835 869 -2228 -587 2344 -157

82 241 293 206 165 282 559 335 325 1293 1142 920 2446 6912 11244 6868346 1118 831 765 -6 684 1516 731 -9004 -4850 -7422 -7092 -3015 -9319 -1074 -4469

0 0 0 0 306 367 587 420 0 0 0 0 170 41 252 154346 1118 831 765 300 1051 2103 1151 -9004 -4850 -7422 -7092 -2845 -9278 -822 -4315

441 1535 704 893 -1346 104 1409 56 -8589 -2809 -4014 -5137 -9285 -12456 -607 -7449

441 1535 704 893 -1651 -263 822 -364 -8589 -2809 -4014 -5137 -9455 -12497 -859 -7603-166 -225 -318 -236 626 153 449 409 413 429 419 420 812 1661 -252 740

25 -318 169 -42 740 354 -339 252 -634 -2508 -3721 -2287 4191 -643 -3771 -7547 126 277 150 280 441 584 435 -195 38 -106 -88 1437 2160 3809 2469

346 1118 831 765 -6 684 1517 731 -9004 -4850 -7422 -7092 -3015 -9319 -1074 -4469


Table 3B. Balance-of-payments effects of external shocks and of policy responses tothese shocks (%)

Average Average1974 1975 1976 1974-76 1979 1980 1981 1979-81

Newly-indusriatlizing economies

1. External shocksTerms of trade effects/average trade 35.4 46.9 31.4 37.7 9.7 22.5 24.5 19.3Terms of trade effectsjGNP 4.5 5.6 3.8 4.6 1.5 3.5 4.2 3.1Export volume effects/exports 1.5 12.2 6.3 6.7 4.3 7.4 10.8 7.8Export volume effects/GNP 0.2 1.2 0.7 0,7 0.6 1.1 1.8 1.1External shocks/GNP 4.6 6.8 4.5 5.3 2.0 4.6 6.0 4.2Interest rate effects/GNP 0.0 0.0 0.0 0.0 0.9 1.6 2.8 1.8

11. Policy responsesAdditional net external financing/

average trade 42.8 39.8 5.2 28.7 7.9 11.0 -0.9 5.7Additional net external financing/GNP 5.4 4.8 0.6 3.5 1.2 1.7 -0.2 0.9Increase in export market shares/exports -3.4 -0.7 1.7 -0.6 2.5 7.0 15.6 9.0Import substitution/imports -2.3 8.7 21.6 9.2 0.1 -1.2 -1.3 -0.8Effects of lowerGNPgrowth rate/imports -0.6 6.7 6.3 4.1 2.9 12.0 21.3 12.4

Outward-oriented NICs

1. External shocksTerms of trade effects/average trade 27.8 34.3 16.4 25.4 5.9 19.2 26.3 17.7Terms of trade effects/GNP 8.8 10.7 5.8 8.4 2.5 8.7 12.4 8.0Export volume effects/exports -0.4 12.4 4.4 5.4 5.2 9.9 14.7 10.3Export volume effects/GNP 0.1 3.6 1.5 1 7 2.1 4.3 6.9 -4.5External shocks/GNP 8.7 14.4 7.3 10.0 4.6 13.0 19.3 12.5Interest rate effects/GNP 0.0 0.0 0.0 0.0 0.8 1.8 2.9 1.9


average trade 17.7 9.6 -21.2 0.3 4.2 2.8 -0.8 1.9Additional net external financing/GNP 5.6 3.0 -7.4 0.1 1.8 1.2 -0.4 0.9Increase in export market shares/exports 4.1 8.1 16.1 10.1 3.5 7.5 12.7 8.3Import substitution/imports 1.1 14.7 18.9 11.S 3.6 3.0 6.6 4.4Effects of lower GNP growth rate/imports 4.5 12.5 6.9 7.9 -0.5 15.2 22.4 12.7


1. External shocksTerms of trade effects/average trade 40.0 54.6 42.8 45.7 12.9 25.2 23.1 20.7Terms of trade effectslGNP 3.7 4.8 3.5 4.0 1.3 2.6 2.6 2.2Export volume effects/exports 2.9 12.1 7.9 7.7 3.3 5.0 7.3 5.4Export volume effects/GNP 0.2 0.8 0.5 03 0.3 0.4 0.8 8 TWExternal shocks/GNP 3.9 5.6 4.0 4C5 1.5 3.0 3.4 2.6Interest rate effects/GNP 0.0 0.0 0.0 0.0 0.9 1.6 2.7 1.7


average trade 57.8 58.3 25.2 47.2 11.1 18.0 -0.9 9.0Additional net external financing/GNP 5.4 5.1 2.1 4.1 1.1 1.8 -0.1 0.9Increase in export market shares/exports -9.0 -7.3 -11.3 -9.3 1.5 6.4 18.2 9.6Import substitution/imports -4.0 5.5 23.3 7.7 -2.7 -4.4 -7.5 -4.9Effects of lower GNPgrowth rate/exports -3.2 3.6 5.9 1.9 5.6 9.6 205 12.1


1. External shocksTerms of trade effects/average trade 19.7 41.6 31.1 30.4 4.3 3.3 -6.5 -0.1Terms of trade effects/GNP 1.6 2.9 2.1 2.2 0.4 0.4 -0.8 -0.0Export volume effects/exports 1.6 12.0 4.2 5.7 2.4 6.3 8.6 5.9Export volume effects/GNP 0.1 0.6 0.2 0.3 0.2 0.5 0.8 0.5External shocks/GNP 1.7 3.5 2.3 2.5 0.6 0.9 0.0 0.5Interest rate effects/GDP 0.0 0.0 0.0 0.0 1.0 1.7 3.3 2.0

11 Policy responsesAdditional net external financing/

average trade 37.0 56.7 19.5 37.8 10.7 32.8 21.7 22.4Additional net external financing/GNP 2.9 4.0 1.3 2.7 1.1 3.7 2,8 2.6Increase in export market shares/exports -13.7 -31.5 -36.3 -26.9 11.5 12.6 20.1 15.1Import substitution/imports -4.6 2.7 21.7 5.7 -15.0 -30.7 -37.5 -29.2Effects of lower GNP growth rate/exports 0.0 10.7 17.9 9.0 2.5 3.3 7.6 4.8

Source: World Bank economic and social data base.


Average Average Average Average1974 1975 1976 1974-76 1979 1980 1981 1979-81 1974 1975 1976 1974-76 1979 1980 1981 1979-81

Less developed economies NICs and LDCs

13.1 50.5 38.2 34.5 11.0 35.0 47.0 31.5 29.7 47.9 33.2 36.9 10.0 25.2 29.4 22.01.2 4.7 3.5 3.2 1.4 4.2 5.8 3.9 3.5 5.3 3.7 4,2 1.4 3.7 4.7 3.33.1 13.3 10.7 9.1 4.6 8.1 13.0 8.6 1.9 12.5 7.4 7.3 4.4 7.6 11.2 8.00.3 1.0 0.9 0.7 0.5 0.8 1.3 0.9 0.2 1.1 0.8 0.7 0.5 1.0 1.7 1.11.5 5.7 4.4 3.9 1.9 5.0 7.2 4.8 3.6 6.5 4.5 4.9 2.0 4.7 6.4 4.40.0 0.0 0.0 0.0 0.4 0.6 1.1 0.7 0.0 0.0 0.0 0.0 0.8 1.3 2.3 1.5

32.4 84.7 56.3 58.4 4.0 38.8 55.2 33.4 40.2 52.1 18.5 36.5 7.0 17.1 11.3 11.93.0 7.9 5.2 5.4 0.5 4.6 6.8 4.1 4.7 5.8 2.1 4.1 1.0 2.5 1.8 1.8

-8.1 -6.0 -1.6 -5.1 1.8 -7.8 -1.7 -2.5 -4.7 -2.1 0.9 -1.8 2.3 3.9 12.2 6.5-8.3 -15.8 -8.0 -10.8 6.0 3.9 -2.3 2.3 -3.8 1.9 13.8 3.9 1.5 -0.1 -1.6 -0.1-0.2 0.2 1.5 0.5 2.4 4.3 5.8 4.2 -.0.5 4.8 5.0 3.1 2.8 10.2 17.6 10.5

Outward-oriented LDCs Outward-oriented NlCs and LDCs

11.4 35.7 26.4 24.5 11.6 26.8 31.7 23.7 25.0 34.5 18.0 25.3 6.9 20.5 27.1 18.62.0 5.8 4.6 4.2 2.8 6.4 7.4 5.6 7.0 9.3 5.4 7.2 2.6 8.0 11.0 7.32.5 13.2 6.5 7.3 0.7 5.2 8.4 4.9 0.1 12.5 4.7 5.7 4.6 9.2 13.8 9.50.3 1.6 1.0 1.0 0.1 1.0 1.6 1.0 0.0 3.1 1.4 1.5 1.6 3.4 5.5 3.52.3 7.4 5.6 5.1 2.9 7.4 9.0 6.5 7.0 12.4 6.8 8.7 4.2 11.5 16.5 10.90.0 0.0 0.0 0.0 0,8 1.0 1.8 1.2 0.0 0.0 0.0 0.0 0.8 1.6 2.6 1.7

11.2 32.5 5.9 16.0 10.1 29.4 23.1 21.1 16.6 13.5 -16.8 3.0 5.2 7.2 2.9 5.02.0 5.3 1.0 2.7 2.4 7.0 5.4 5.0 4.6 3.6 -5.1 0.8 2.0 2.8 1.2 2.03.9 4.1 17.9 9.4 7.9 8.1 12.7 9.6 4.1 7.5 16.4 10.0 4.2 7.6 12.7 8.50.0 7.3 8.9 5.5 -4.1 -6.5 -0.3 -3.6 0.9 13.3 17.1 10.6 2.2 1.2 5.4 3.0

-0.8 0.8 0.5 0.2 0.2 2.4 4.6 2.5 3.5 10.2 5.8 6.4 -0.4 12.8 19.3 10.9

Inward-oriented LDCs Inward.oriented NICs and LDCs

13.7 54.4 41.8 37.3 10.8 38.9 53.7 35.1 32.2 54.6 42.5 43.1 12.3 28.8 31.1 24.61.1 4.6 3.3 3.1 1.1 3.7 5.5 3.5 2.9 4.7 3.4 3.7 1.2 2.9 3.4 2.53.3 13.3 11.9 9.6 6.2 9.4 15.0 10.3 3.0 12.5 9.3 8.3 4.2 6.2 9.2 6.70.2 0.9 0.9 0.7 0.6 0.8 1.3 0.9 0.2 0.8 0.7 0.6 0.3 0.5 0.9 0.61.4 5.5 4.2 3.8 1.7 4.5 6.8 4.4 3.1 5.5 4.1 4.3 1.6 3.4 4.3 3.10.0 0.0 0.0 0.0 0.4 0.5 0.9 0.6 0.0 0.0 0.0 0.0 0.8 1.3 2.2 1.4

38,7 98.4 71.9 70.7 1.3 43.3 69.1 38.9 52.1 71.3 40.3 54.6 8.3 24.6 17.5 17.03.2 8.3 5.7 5.8 0.1 4.1 7.1 3.9 4.7 6.1 3.3 4.7 0.8 2.5 1.9 1.8

-11.2 -8.5 -7.3 -8.9 -0.7 -15.0 -8.0 -7.7 -9.7 -7.7 -10.0 -9.2 0.8 0.8 11.8 5.0-11.0 -22.1 -13.4 -15.8 10.7 9.0 -3.2 5.1 -5.9 -3.2 11.9 0.7 0.9 -0.9 -6.3 -2.2

0.0 -0.0 1.8 0.6 3.4 5.2 6.4 5.1 -2.3 2.5 4.6 1.5 5.0 8.5 16.5 10.2


15.1 46.6 33.5 32.0 -5.5 12.8 26.3 12.0 --140.8 -83.0 -99.3 -106.1 -23.7 -64.3 -49.3 -46.52.0 6.4 3.9 4.2 -0.9 2.0 4.6 2.0 -21.5 -13.8 -17.8 -17.7 -4.2 -12.0 -8.9 -8.55.4 17.0 21.0 14.2 4.6 8.8 16.1 9.8 4.7 19.9 16.0 13.4 8.9 26.5 50.9 27.20.6 1.8 2.1 1.5 0.8 1.4 2.7 1.7 0.7 2.9 2.4 2.0 1.9 5.1 8.2 5.12.6 8.2 6.1 5.7 -0.0 3.4 7.3 3.6 -20.7 -10.9 -15.4 -15.6 -2.3 -6.9 -0.8 -3.30.0 0.0 0.0 0.0 1.6 1.8 2.8 2.1 0.0 0.0 0.0 0.0 0.1 0.0 0.2 0.1

25.2 81.6 43.8 51.2 -53.0 -8.4 22.6 -11.1 --129.6 -37.9 -46.5 -68.0 -41.1 -49.5 -3.4 -31.23.4 11.3 5.1 6.6 8.4 -1.3 3.9 -1.8 -19.8 -6.3 -8.3 -11.3 -7.3 -9.3 -0.6 -5.7

-10.8 -15.8 -22.8 -16.3 17.4 4.7 12.9 11.9 5.9 6.6 5.9 6.1 2.9 6.4 -1.1 2.91.3 -13.6 9.3 -2.0 28.2 11.6 -8.9 8.0 -10.1 -30.2 -36.8 -27.8 22.8 -2.6 -13.5 -0.32.4 5.4 15.3 7.4 10.6 14.5 15.4 13.8 -3.1 0.5 -1.0 -1.1 7.8 8.9 13.7 10.5


Table 4. Debt service ratios and external debt ratios

1973 1974 1975 1976 1977 1978 1979 1980 1981

Debt service ratio*Newly industrializing economies

(NICs) 18.2 16.2 22.3 24.0 24.3 29.2 29.9 25.9 29.9Less developed economies (LDCs) 21.0 28.8 18.6 19.7 21.1 29.3 25.3 26.9 32.5NICs and LDCs 19.0 19.9 21.3 22.9 23.5 29.2 28.8 26.1 30.4Outward-oriented NICs 10.5 9.3 10.2 9.4 9.9 10.7 10.0 10.8 12.0Outward-oriented LDCs 18.8 10.0 10.7 10.6 10.2 17.5 18.9 21.5 25.1Outward-orientedNICsandLDCs 11.8 9.4 10.3 9.6 10.0 11.7 11.3 12.3 13.8Inward-oriented NlCs 23.3 21.5 31.3 36.9 37.3 47.3 50.0 40.2 45.9Inward-oriented LDCs 21.6 34.4 21.0 22.8 25.1 33.9 27.8 29.4 35.8Inward-oriented NICs and LDCs 22.7 26.2 27.7 32.3 33.4 43.3 43.2 37.4 43.5NICs with internal shocks 19.6 15.5 29.6 43.0 38.9 54.6 52.3 35.5 46.5LDCs with internal shocks 29.8 23.2 30.7 38.4 36.6 61.3 42.9 50.9 63.2Economies with favourable shocks 5.3 2.2 2.7 3.5 4.6 6.0 6.0 4.4 7.0

External debt ratiotNewly industrializing economies 2.6 5.1 12.5 13.2 14.4 15.6 14.1 14.9 17.8Less developed economies 8.8 8.7 13.9 15.8 16.4 18.0 16.0 15.3 19.9NICs and LDCs 4.6 6.2 12.9 13.9 15.0 16.3 14.6 15.0 18.4Outward-oriented NICs 6.2 10.3 15.9 11.8 10.8 12.0 10.2 10.4 10.6Outward-oriented LDCs -2.4 -0. 1 1.6 4.2 6.1 10.5 13.0 14.8 20.2Outward-oriented NICs and LDCs 3.8 7.4 11.5 9.7 9.5 11.6 10.9 11.5 12.9Inward-oriented NICs 2.0 4.2 12.0 13.4 15.0 16.4 14.9 15.7 19.3Inward-oriented LDCs 10.3 10.0 15.8 17.7 18.3 19.3 16.6 15.4 19.8Inward-oriented NICs and LDCs 4.7 6.0 13.1 14.6 16.0 17.2 15.3 15.6 19.4NlCswith internal shocks 1.2 1.7 10.4 14.4 17.3 17.5 11.3 10.7 17.4LDCs with internal shocks 9.8 10.7 19.5 26.5 34.0 46.8 38.1 31.8 34.1Economies with favourable shocks 13.6 2.8 8.5 7.9 8.0 11.6 7.7 3.8 9.0

Source: World Bank economic and social data base.*The ratio of net interest payments plus an amortization to the value of merchandise exports.tThe ratio of medium- and long-term external debt, adjusted for foreign exchange resources, to the GrossNational Product.

(a) Additional net external financing and 53% in outward-oriented, LDCs. Thisdivergence continued between 1976 and 1978.

Developing economies relied to a consider- Foreign borrowing, in turn, led to increasedable extent on foreign borrowing to cope with indebtedness and debt service charges. In allthe external shocks of the 1974-76 period. the countries studied, taken together, theIn the cases studied, additional net external external debt ratio increased from 5% in 1973financing equalled 85% of the balance-of- to 16% in 1978 whereas their average debtpayments effects of external shocks during service ratio rose from 19% to 29%. Increasesthis period. The ratio was 66% for newly- were larger than the average in the NICs, butindustrializing economies and 138% for less the extent of external indebtedness in 1978developed countries; in the latter case, losses was greater in the LDCs which had startedin export market shares and negative import with a larger initial debt position.substitution aggravated the effects of external Given their extensive reliance on foreignshocks. borrowing, the external debt ratio increased

Within both groups, inward-oriented eco- from 5% in 1973 to 17% in 1978 in inward-nomies placed much greater reliance on foreign oriented economies while their debt serviceborrowing than outward-oriented economies ratio rose from 23 to 43%. In turn, althoughthat made considerable efforts at domestic the ratio of their external debt to GNP increasedadjustment. Thus, in 1974-76, the ratio of from 4% in 1973 to 12% in 1978 in outward-additional net external financing to the balance- oriented economies, their debt service ratioof-payments effects of external shocks was remained unchanged at 12% as rapid increases91% in inward-oriented, and 1% in outward- in exports permitted the servicing of an increasedoriented, NICs; it was 155% in inward-oriented, loan volume.

ADJUSTMENT POLICIES IN DEV'ELOPING COUNTRIES 967

The debt service ratio remained unchanged growth rates largely compensated for thein both outward-oriented NICs and LDCs decrease in additional net external financingalthough, with their greater reliance on foreign in inward-oriented economies.borrowing, the external debt ratio increased Aks far as domestic adjustment policies aremore in the latter case. Inward-oriented NICs concerned, the principal difference betweenand LDCs also showed considerable similarity, outward-oriented and inward-oriented eco-but external debt and debt service ratios nornies lies in their export promotion efforts.increased less in the second group that was able In outward-oriented economies, the favourableto rely to a considerable extent on foreign aid, effects of increases in export market shares

With the growing indebtedness of developing offset about three-tenths of the balance-of-economies limiting the extent of further payments effects of external shocks in bothborrowing, additional net external financing periods. This result reflects the favourableaveraged only 41% of the balance-of-payments treatment of primary and manufactured exportseffects of external shocks in 1979-81 in the and the adoption of realistic exchange ratesdeveloping economies studied. Reliance on following external shocks4 Again, there isadditional net external financing declined little difference in this regard between outward-from 110% in 1974-76 to 56% in 1979-81 oriented NICs and LDCs.in inward-oriented economies, several of In turn, losses in export market shareswhich encountered problems of creditworthi- added one-seventh to the adverse balance-of-ness. Correspondingly, the external debt and payments effects of external shocks in inward-debt service ratios of these economies stabilized oriented economies in 1974-76. This resultafter 1978. obtained as the countries in question biased

In turn, outward-oriented economies were the system of incentives against exports and,able to step up borrowing abroad, with the on the whole, maintained overvalued exchangeratio of additional net external financing to rates. Nor was there any difference in thisthe balance-of-payments effects of external regard between inward-oriented NICs andshocks rising from 10% in 1974-76 to 18% LDCs. At the same time, declines in exportin 1979-81. Nevertheless, they continued market shares substantially exceeded theto rely largely on domestic adjustment; with average forcountries which experienced internalmoderate foreign borrowing, their average shocks that aggravated the effects of tradeexternal debt and debt service ratios increased ani exchange rate policies on exports.by less than one-fifth between 1974-76 and Inward-oriented economies lost export1979-81. market shares in 1979-81 as well, if one adjusts

for increases in the petroleum exports ofMexico and Peru from newly-found deposits.5

(b) Domestic adjustment policies At the same time, inward-oriented NICs ex-hibited a better export performance than

Reliance on additional net external financ- inward-oriented LDCs as policy reforms ining indicates the paucity of domestic adjust- Portugal and Turkey had their beneficialment efforts in inward-oriented developing effects on exports during the period.countries. In 1974-76, on the average, these There were also differences between inward-countries did not undertake import substitu- oriented and outward-oriented economies as fartion while savings in imports owing to the as import substitution is concerned. Whiledeceleration of economic growth were offset import substitution offset nearly four-tenthsseveral times by the loss in exports due to of the balance-of-payments effects of externaldecreases in export market shares. In the sarne shocks in 1974-76 and one-ninth of theseperiod, outward-oriented economies followed effects in 1979-81 in outward-oriented eco-a balanced policy of export promotion and nomies, import substitution was, on the average,import substitution, to which import savings apiproximately nil in 1974-76 and becamedue to the application of deflationary policies negative in 1979-81 in inward-oriented develop-immediately following the quadrupling of oil ing countries.prices should be added. These results require explanation in view of

The pattern of adjustment underwent little the fact that inward-oriented economies hadchange in 1979-81 in outward-oriented eco- relatively high import protection that tendednomies, except that import substitution had to increase further after 1973. Various factorslesser - and deflationary policies greater - have contributed to the observed results. Toeffects during the period. In turn, import begin with, net foreign exchange savings insavings associated with the decline in economic inward-oriented economies declined as import


T able 5. Expenditure shares, incremental capital-output ratios, and growth rates

1963-73 1970-73 1973-76 1976-79 1973-79 1979-82

Newly-industrializing economies

Savings ratios*Domestic savings ratio 20.4 20.7 21.5 22.7 22.1 22.6Foreign savingsratio 1.7 2.3 4.4 2.3 3.3 2.1

Incremental capital output ratiost 3.0 2.9 4.4 4.2 4.3 11.5

Growth rates (constant prices)Gross national product 6.9 7.7 5.3 5.5 5.5 1.6Population 2.3 2.2 2.1 1.9 2.0 2.0Per capita GNP 4.6 5.5 3.2 3.6 3.5 -0.4

Outward-oriented NICs

Savings ratios*Domestic savingsratio 17.1 19.0 23.5 26.3 24.9 24.1Foreign savings ratio 3.1 2.8 4.7 1.3 3,0 2.7


Growth rates (constant plices)Gross national product 7.1 6.9 4.6 9.0 7.3 2.4Population 2.3 1.8 1.7 1.6 1.7 1.7Per capita GNP 4.8 5.1 2.9 7.3 5.7 0.8


Savings ratios*Domestic savings ratio 20.9 21.1 21.2 22.0 21.6 22.3Foreign savings ratio 1.4 2.2 4.4 2.4 3.4 1.9

lncremenital capital output ratiost 3.0 2.9 4.3 4.7 4.5 12.0Growth rates (constant prices)

Gioss national product 6,9 7.9 5.5 4.9 5.1 1.4Population 2.4 2.3 2.2 2.0 2.1 2.0Per capita GNP 4.5 5.5 3.2 2.9 3.0 -0.6


Savings ratios*Domestic savings ratio 19.7 19.9 21.1 23.9 22.5 24.5Foreign savings ratio 0.7 0.9 2.0 0.6 1.3 0.8


Growth rates (constant prices)Gross national product 6.3 5.6 3.3 5.1 4.0 1.8Population 2.4 2.5 2.4 2.3 2.4 2.2Per capita GNP 4.0 3.1 0.9 2.8 1.6 -0.4

Source: World Bank econornic and social data base.Excludes data for the first year of each period.Incremental capital output ratios have been calculated assuming one year lag between invest-

ment and output. For example, the 1970-73 ratio has been derived by dividing the sum of grossdomestic investment in 1970,1971 and 1972 by the increment in GDP between 1970 and 1973,both in constant prices.


1963-73 1970-73 1973-76 1976-79 1973-79 1979-82 1963-73 1970-73 1973-76 1976-79 1973-79 1979-82

Less developed economies NICs and LDCs

17.2 17.8 19.2 20.7 19.9 19.8 19.2 19.8 20.8 22.2 21.5 21.91.2 0.9 3.8 3.6 3.7 5.3 1.5 1.8 4 2 2.6 3.4 2.94.5 5.8 4.4 5.3 4.8 4.7 3i.4 3.4 4.4 4.5 4.4 8.1

4.1 3.1 5.2 4.2 5.1 4.4 5.9 6.1 5.3 5.1 5.3 2.5*2.4 2.3 2.2 2.2 2.2 2.3 2.4 2.3 2.? 2.1 2.2 2.2

1.7 0.8 3.0 2.0 2.8 2.1 3.5 3.9 3.1 3.0 3.2 0.3

Outward-oriented LDCs Outward-oriented NICs and l.)Cs

20.3 21.6 22.7 23.1 22.9 22.1 18.0 19.7 23.3 25.5 24.4 23.62.7 2.2 3.4 5.7 4.6 5.0 3.( 2.6 4.3 2.5 3.4 3.32.9 2.7 3.2 3.1 3.1 4.6 2.7 2.9 4.1 2.9 3.3 7.8

7,2 7.8 6.2 6.8 6.6 4.5 7.1 7.1 5,1 8.4 7.1 3.02.9 2.9 2.9 2.7 2.7 2.4 2.6 2.3 2.3 2.1 2.2 2.04.3 4.9 3.3 4.2 3.8 2.1 4.6 4.8 2.8 6.2 4.9 1.0

Inward-oriented LDCs Inward-oriented NICs and L[)Cs

16.8 17.4 18.6 20.3 19.4 19.4 19.3 19.8 20.4 21.5 21.0 21.51.0 0.7 3.9 3.2 3.5 5.4 1.3 1.7 ' 4.2 2.6 3.4 2.9

' 4.9 7.1 4.6 6.0 5.3 4.7 3.5 3.5 4.4 5.0 4.7 8.2

3.7 2.5 5.1 3.8 4.8 4.4 5.7 6.0 5.3 4.5 c.o 2.4*2.4 2.2 2.2 2.2 2.2 2.3 2.4 2.3 2.2 2.1 2.2 2.2

1.4 0.3 2.9 1.6 2.6 2.2 3.4 3.7 3.1 2.4 2.9 0.2


18.7 16.0 13.0 15.3 14.2 15.9 15.0 20.7 25.9 26.2 26.0 23.40.6 1.9 7.3 0.2 3.8 3.7 1.1 --0.6 -4.0 -1.8 -2.9 -0.34.1 4.1 6.2 12.6 7.9 9.1 2.2 2.1 3.4 5.3 4.3 11.2

4.3 4.1 3.4 0.6 1.6 2.4 6.2 7.8 5.9 4.6 5.4 2.12.8 3.0 2.9 2.8 2.9 2.8 2.3 2.4 2.4 2.4 2.4 2.51.5 1.1 0.4 -2.2 --1.3 -0.4 3.9 5.4 3.4 2.2 3.0 -0.4


substitution was increasingly undertaken in 1976-79. Practically the same pattern isindustries that required imported inputs and observed in outward-oriented NICs as wellthe smallness of domestic markets did not as LDCs.allow for full capacity utilization and/or In turn, despite extensive foreign borrowinglimited the exploitation of economies of for the sake of maintaining past rates of eco-scale. In turn, the expansion of exports in nomic growth, these rates declined fromoutward-oriented economies permitted efficient 5.7% in 1963-73 to 5.3% in 1973-76, andimport substitution by removing the market again to 4.5% in 1976-79, in inward-orientedconstraint lor the products in question. Further- economies. The decline in growth rates wasmore, discrimination against agriculture and especially pronounced in inward-oriented NICsdelays in adjusting domestic fuel prices reduced while inward-oriented LDCs experienced athe extent of import substitution in primary temporary improvement.products in inward-oriented economies that Differences in economic performance findwas not the case under outward orientation. their origin in differences in the efficiency ofFinally, the overvaluation of the exchange rate investment and in domestic savings ratios.hindered import substitution in inward-oriented Using incremental capital-output ratios aseconomies while the adoption of realistic a measure - however imperfect - of invest-exchange rates encouraged the replacement of ment efficiency, one finds that this ratioimports by domestic production in outward- increased from 3.5 in 1963-73 to 4.7 inoriented economies. 1973-79 in inward-oriented economies while

In the absence of output-increasing policies it went only from 2.7 to 3.3 in outward-of export promotion and import substitution, oriented economies. Again, the results forinward-oriented developing countries had to NICs and LDCs are rather similar, except thatadopt deflationary policies after 1978 as the the increase in the incremental capital-outputpossibilities for further borrowing diminished. ratio was relatively small in inward-orientedReliance on deflationary measures increased LDCs.to a lesser extent in outward-oriented eco- Outward-oriented economies also exhibitednomies, which continued to apply output- superior savings performance, with theirincreasing policies. domestic savings ratio rising from 18.0% in

In the 1974-76 period, the favourable 1963-73 to 24.4% in 1973-79. Savings ratiosbalance-of-payments effects of external shocks increased less, from 19.3% to 21.0%, in inward-were offset by negative additional net external oriented economies and these differencesfinancing and, to a lesser extent, by increases were only partially offset by increased foreignin import shares associated with large invest- borrowing. Similar conclusions apply to NICsment programmes in developing countries and LDCs, taken individually, within the twoexperiencing favourable external shocks. These groups.programmes came to a rather abrupt end in Differences in incremental capital-oatputthe late 1970s and the countries in question ratios and domestic savings ratios are, in turn,further reduced import requirements through explained by differences in the policies applied.the application of deflationary policies, with To begin with, the system of incentives applieda corresponding increase in negative additional discriminated against exports and agriculture,net external financing. with the extent of discrimination increasing

after 1973, in inward-oriented economies. Bycontrast, outward-oriented economies main-

(c) Thepoliciesappliedand tained their policy stance and were joined byeconomic growth Chile and Uruguay in the mid-I 970s.

The efficiency of investment in inward-In order to limit reliance on foreign borrow- oriented economies was also adversely affected

ing, outward-oriented economies initially by the lack of sufficient attention given toapplied deflationary policies during the first economic considerations in their large publicperiod of external shocks. The resulting de- investment programmes while econornic factorsceleration of economic growth remained had greater importance in the smaller publictemporary, however, as output-increasing investment programmes of outward-orientedpolicies permitted these economies to reach - economies. Furthermore, inward-oriented eco-and even to surpass - earlier rates of growth. nomies practised plice control to a considerableThus, following a decline from 7.1% in 1963-73 extent, thereby aggravating distortions into 5.1% in 1973-76, GNP growth rates in domestic prices, that was not the case underoutward-oriented economies attained 8.4% in outward-orientation.


At the same time, outward-oriented eco- with the differences in growth rates offsettingnomies encouraged private savings through the differences in the size of external shocksthe adoption of realistic interest rates and several times.limited public dissavings by reducing govem- T'hese conclusions have been derived byment budget deficits. In turn, inward-oriented classifying developing economies as outward-economies generally maintained negative real and inward-oriented. While such a binaryinterest rates and increased the deficit of the classification necessarily involves a certainpublic sector.6 degree of arbitrariness, the results have been

In response to the deflationary measures reconfirmed in an econometric study of 43taken, economic growth rates declined in developing economies, in which initial tradeboth outward-oriented and inward-oriented orientation and policy responses to externaleconomies after 1978. But the slowdown of shocks have been separately introduced.economic growth in outward-oriented eco- The extent of trade orientation has beennomies remained temporary whereas inward- estimated as deviations of actual from hypo-oriented economies suffered further declines thetical values of per capita exports, the latterin growth rates as they applied deflationary having been derived in a regression equationpolicies. Thus, while the average difference that includes per capita incomes, populationin GNP growth rates between the two groups and the ratio of mineral exports to the grosswas less than one percentage point in the national product as explanatory variables.1979-82 period, growth rates averaged 5% in In turn, alternative policy responses have beenoutward-oriented economies in 1983 compared represented by relating the balance-of-paymentsto stagnation in inward-oriented economies. effects of export promotion, import substitu-

Finally, owing to inefficiencies in new tioni and additional net external financing toinvestments and in resource allocation in the bala nce-of-payments effects of externalgeneral, countries experiencing favourable shocks.7

external shocks did not succeed in raising their Including further the extent of externalGNP growth rates in 1974-76, even though shocks, per capita incomes and the share ofthey increased the share of investment in manufactured exports in total exports amongGDP by one-half. And growth rates declined the explanatory variables, it has been shownto a considerable extent after 1978 as the that initial trade orientation as well as theeffects of these inefficiencies came to be more character of policy responses to externalstrongly felt. shocks importantly affected rates of economic

growth in the 1973-79 period. GNP growth4. CONCLUSIONS rates differ by 1.0 percentage point between

countries in the upper and in the lower quartilesIt has been shown that outward-oriented of distribution in terms of trade orientation

economies relied largely on output-increasing in 1973; also, there is a difference of 1.2 per-policies of export promotion and import centage points in growth rates between coun-substitution to offset the balance-of-payments tries in the upper and the lower quartiles of theeffects of external shocks in the 1974-76 distribution in regards to export promotionand the 1979-81 periods and accepted a tem- in response to the external shocks of theporary decline in the rate of economic growth period under consideration.in order to limit their external indebtedness. The results are cumulative, indicatingIn turn, inward-oriented economies failed to that both initial trade orientation and theapply output-increasing policies of adjustment; choice of adjustment policies in response tothey financed the balance-of-payments effects external shocks importantly contributed toof external shocks by foreign borrowing in the economic growth during the period under1974-76 period and had to take deflationary review. In fact, these factors explain a largemeasures in 1979-81 as their increased in- proportion of intercountry differences indebtedness limited the possibilities for further GNP growth rates that averaged 5.0% in theborrowing. The policies applied led to economic 43 developing countries under considerationgrowth rates substantially higher in outward- du:ring the 1973-79 period, with an upperoriented than in inward-oriented economies, quartile of 6.5% andr a lower quartile of 3.3%.


NOTES

1. Bela Balassa, 'Adjustment to external shocks in see Bela Balassa, 'Structural adjustment policies indeveloping economies', World Bank Staff Working developing economies', World Development (JanuaryPaper No. 472 (July 1981); to be published in the 19 8 2), pp. 2 3-38.Proceedings of the Conference on the Problem ofChanges in Relative Prices organized by the Inter- 5. The effects of the rise of petroleum exports arenational Economic Association and held in Athens apparent in the large contribution of increases inin September 1981. export market shares in 1979-81 in developing coun-

tries that experienced internal shocks in 1974-762. Adjusting for inflation rates does not modify (Mexico among the NICs and Peru among the LDCs).the results as unit values for the manufactured exportsof the developed countries, which can be considered 6. Cf. Bela Belassa, op. cit. (1982).as appropriate deflator, increased at the same rate(7,6% a ye.er) between 1977 and 1981 as between1975 and 1978 (United Nations, Monthly Bulletin 7. Bela Balassa, 'Exports, policy choices, and eco-of Statistics, various issues). nomic growth in developing countries after the 1973

oil shock', World Bank, Development Research Depart-3. However, in 1974-76, the outward-oriented ment, Discussion Paper No. 48 (May 1983); to beLDCs had favourable pure terms of trade effects published in the Journal of Development Economics.and their terms of trade losses were entirely due to The results are little affected if additional variables,unbalanced trade effects. such as the size of external shocks, per capita incomes,

and the share of manufactured exports, are introduced4. For det3iled discussion of the policies applied, in the calculations.

No. 292. Gregory K Ingram, -Land in Perspective: Its Role in the Strcture of Cities," IAbrldCongress on Land Policy, 1980

No. 293. Rakesh Mohan and Rodrigo Vilamizar, "The Evolution of Land Values in the Contextof Rapid Urban Growth: A Case Study of Bogota and Calh, Colombia," Vkrld Congresson Land Policy, 1980

No. 294. Barend A. de Vries, 'lnternational Ramifications of the External Debt Situation," TheAMEX Bank Review Speaal Papers

No. 295. Rakesh Mohan, "The Morphology of Urbanisation in India," Economic and PoliticalV%ekly

No. 296. Dean T. Jamison and Peter R. Mooclk 'Farmer Education and Farm Efficiency in Nepal:The Role of Schooling, Extension Services, and Cognitive Skills," *brld Development

No. 297. Sweder van Wiinbergen, 'The 'Dutch Disease': A Disease after Alt?' The EconomicJowmial

No. 298. Arne Drud and Wafik M. Grais, "Macroeconomic Adjustment in Thailand: DemandManagernent and Supply Conditions," Journal of Policy Modeling

No. 299. Shujiro Urata, "Factor Inputs and Japanese Manufacturing Trade Structure," The Reviewof Economics and Statistics

No. 300. Dipak Mazumdar, 'The Rural-Urban Wage Gap Migration and the Working of UrbanLabor Market: An Interpretation Based on a Study of the Workers of Bombay City,"Indian Economic Review

No. 301. Gershon Fder and Roger Slade, "Contact Fanner Selection and Extension Visits: TheTraining and Visit Extension System in Haryana, India," Quarterly Journal of Interna-tional Agriculture

No. 302. James Hanson and Jaime de Melo, 'The Uruguayan Experience with Liberalizationand Stabilization, 1974-1981," Journal of Interamerican Studies and W%brld Affairs

No. 303. Nancy Birdsall and Dean T. Jamison, 'Income and Other Factors influencing Fertilityin China"' Populafiotn and Development Review

No. 304. Graham Donaldson,-Food Security and the Role of the Grain Trade," American Journalof Agricultural Economics

No. 305. William F. Steel and Yasuoki Takagi, "Small Enterprise Development and theEmployment-Output Trade-Off," Oxfor Economic &pers

No. 306. Oh Havrylyshyn and Engin Civan, 'Intra-Industry Trade and the Stage of Develop-ment: A Regression Analysis of Industrial and Developing Countries," Intra-IndustryTrade: Empirical and Methodological Aspects

No. 307. Mateen Thobani, "A Nested Logit Model of Travel Mode to Work and AutoOwnership," Jountal of Urban Economics

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No. 309. Reynaldo Martorell, Joanne Leslie, and Peter R Moock, "Characteristics and Deter-minants of Child Nutritional Status in Nepal," The American Jowunal of Clinical Nutrition

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