Development Economics and Structuralist Macroeconomics
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Development Economics and Structuralist Macroeconomics

Essays in Honor of Lance Taylor

Edited by Amitava Krishna Dutt

Lance Taylor is widely considered to be one of the pre-eminent development economists in the world and is known for his work on development planning, macroeconomics of development, stabilization policy, and the global economy. He has also been the major force behind structuralist economics, which is seen by many to be a major alternative to orthodox development economics and policy prescriptions. The essays in this volume, written by well-known scholars in their own right, make contributions to each of these areas while honoring the contributions made by Lance Taylor.
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Chapter 19: Developing countries' anti-cyclical policies in a globalized world

José Antonio Ocampo


19. Developing countries’ anti-cyclical policies in a globalized world José Antonio Ocampo* The volatility and contagion characteristic of international financial markets, which dominated emerging economies during the 1990s, have deep historical roots.1 Indeed, from the mid-1970s to the end of the 1980s, Latin America and many other regions in the developing world experienced a long boom–bust cycle, the most severe of its kind since that of the 1920s and 1930s. The shortening but also the intensity of boom–bust cycles have been distinctive features of the 1990s. The latter is reflected, in the words of the Chairman of the Federal Reserve Board, in the fact that the ‘size of the breakdowns and required official finance to counter them is of a different order of magnitude than in the past’ (Greenspan, 1998). Viewed from the perspective of developing countries, the essential feature of instability is the succession of periods of intense capital inflows, in which financial risks significantly increase, facilitated and sometimes enhanced by pro-cyclical domestic macroeconomic policies, and the latter phases of adjustment, in which these risks are exposed and the pro-cyclical character of the measures adopted to ‘restore confidence’ amplify the flow (economic activity) and stock (portfolio) effects of adjustment processes. An essential part of the solution to these problems lies in strengthening the institutional framework to prevent and manage financial crises at the global level.2 This chapter, however, looks at the role of developing countries’ domestic policies in managing externally...

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