Nathaniel H. Leff

Macroeconomic adjustment in developing countries: instability, short-run growth, and external dependency

This paper presents an aggregate model for analyzing macroeconomic adjustment and short-run growth in less-developed countries. The model is built on standard theoretical lines; but an important finding of the paper is that empirically, macroeconomic adjustment in the real sector of some differs from the professional expectations that may be prevalent in more-developed countries. This observation leads us to a reconsideration of the macroeconomics of the developing economies, and particularly of some short-term features that affect the long-run expansion path. The analysis also shows why these economies are often subject to chronic inflation and macroeconmic dependence on foreign-capital inflows. 13 references, 4 tables.

Economic Development and Regional Inequality: Origins of the Brazilian Case

I. Emergence of the disparity, 244. — II. Differences in rates of regional export growth, 245. — III. Some questions, 248. — IV. Earlier explanations, 249. — V. An interpretation of the decline of Brazilian sugar and cotton exports, 252. — VI. Land and imperfect factor reallocation, 255. — VII. The exchange-rate mechanism under imperfect factor reallocation, 255. — VIII. Currency-area effects and regional divergence, 258. — IX. Conclusions, 260.

A Simultaneous-Equations Model of Savings in Developing Countries

Postwar experience has confirmed the central importance of domestic savings rates for capital accumulation and other goals in developing countries. Consequently, both for analytical and for policy purposes, it would be helpful to estimate savings functions which are grounded in economic theory and whose parameters are properly identified and free from simultaneous-equations bias. Accordingly, we have formulated a simultaneous-equations model of aggregate saving in developing countries and estimated its parameters with time-series data for five countries (Brazil, Costa Rica, Israel, the Philippines, and Taiwan). On the basis of the parameter estimates, steady-state savings ratios should rise significantly if these countries experience higher rates of income growth. However, for reasons we discuss, an upward movement in savings rates did not occur in these countries over the sample period.

Social benefit-cost analysis and telecommunications investment in developing countries

Abstract Telecommunications expansion can make an important contribution to the social and economic development of less-developed countries. But that in itself does not mean that telecommunications projects should receive top priority in a countrys investment budget. This is because projects in other sectors can also make strong claims to being vital for development. This situation points to a basic problem for development planners: how to allocate scarce resources between competing projects which more than exhaust the available investment budget. The analytical technique that has been developed in answer to this policy problem is a significant extension of social benefit-cost analysis. A pertinent question at this point is: how has the application of the new technique affected budgets for telecommunications investment in developing countries? This paper addresses that question by considering how the World Bank has applied social benefit-cost analysis in the area of telecommunications.

Long-term Brazilian Economic Development

The Purpose of this article is to clarify some historical features of Brazilian economic development in order to gain some insight into the process of long-term growth. The recent extension of the principal macroeconomic time-series to 1920 and the publication of several specialized monographs provide the material for such an analysis. We will begin with a consideration of the timing of Brazilian industrialization and, more important, of the conditions in which it took place. Such a discussion is all the more necessary since it appears that some of the stock ideas concerning Brazilian economic development before 1939 require revision.

Estimating Investment and Savings Functions for Developing Countries, With an Application to Latin America

This paper investigates the conditions that determine annual investment and saving in developing countries. Our model accords special importance to the response of investment and saving to desired wealth ratios, current income growth, and expected inflation. We then estimate the functions with time-series data for 21 Latin American countries. The paper concludes with discussion of the research agenda for macroeconometric modeling of less-developed economies. [200]

Optimal investment choice for developing countries: Rational theory and rational decision-making

Abstract This paper analyzes a key feature of the conceptual process that governments use for making major investment choices in the developing countries. Both through their direct investment activities and through the special incentives (e.g., credit, foreign exchanage, and tax subsidies) they provide, governments typically play a large role in the allocation of investment resources in LDCs. Consequently, the public investment-choice process has significant effects on the efficiency of capital formation and on economic growth in developing countries. Although the feature of the investment-choice process on which we focus has important theoretical and practical implications, it has so far received little analytical attention.

The prospects for higher domestic savings rates in Latin America

Abstract This paper analyzes the prospects for raising domestic saving rates to permit increased investment and/or reduced dependence on foreign-capital inflow in Latin America. We analyze the question of rising saving rates by applying a random-coefficients approach: treating the parameters estimated in time-series analysis for individual countries as observations drawn from an international cross-section of savings behavior. Correlation analysis is then applied to clarify the conditions associated with international differences in savings parameters across a sample of 21 Latin American countries.

Macroeconomic Disequilibrium and Short-Run Economic Growth in Developing Countries

Publisher Summary This chapter discusses the macroeconomic adjustment in the real sector in the form of IS equilibrium. It presents the aggregate investment and saving functions with time-series data for six developing countries. The parameter estimates suggest that the macroeconomic adjustment process in these countries is characterized by instability because aggregate investment tends to be chronically more buoyant than aggregate saving. The chapter explains how monetary factors can serve as stabilizing elements and also why they lead to a trade-off between inflation and real growth in the short run. As money and credit supplies are connected to the economys foreign balance, foreign-capital inflow has a powerful impact both on the real and on the monetary sectors of the economy. This observation indicates another channel of macroeconomic adjustment, namely, the effect of real credit availability upon production through the supply of working-capital requirements. Because of this connection, short-run growth performance is intimately linked with macroeconomic adjustment. The analysis indicates that the macroeconomics of these developing countries show strikingly classical properties, in that saving is an ultimate determinant of long-run growth via its short-run impact on the macroeconomic equilibrium and stability.

Modelling the demand for foreign savings in developing countries: Testing a hypothesis with Latin American data

The demand for foreign savings is an important feature of the economy in many LDCs, and it would be helpful to have a better understanding of its determinants. This paper considers one approach to modelling the demand for foreign savings in LDCs. If the demand for investment shifts out more buoyantly than does the supply of domestic saving in response to current macro‐economic conditions, persistent demand for foreign savings will be generated as a normal feature of the development process. We test this hypothesis with elasticities computed from the parameters of investment and domestic saving equations estimated for a sample of 21 Latin American countries. The empirical results show that in approximately half of the countries in the sample (and most notably in Brazil and in Mexico), the demand for foreign savings is rooted in the parameters of the investment and domestic saving functions.