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Trade, the Balance of Payments and Exchange Rate Policy in Developing Countries
This book is a synthesis of the author's ideas and research concerning the monetary consequences of trade flows, and the relevance of conventional balance of payments adjustment theory. These ideas are considered mainly in the context of developing countries, many of which suffer from deep structural difficulties and severe foreign exchange shortages. Mainstream economic theory regards the balance of payments to be self-adjusting, meaning that the impact of the balance of payments on the growth and development process is neither considered nor analysed. In contrast, the author emphasises the importance of integrating monetary considerations into trade theory and argues that the balance of payments consequences of trade policy need to be carefully addressed. This approach has a number of implications for important issues such as the sequencing of trade liberalisation; the role of the exchange rate in equilibrating the balance of payments; the case for protection; and the way in which the importance of export growth is articulated.
Some of the ideas expressed have a long and distinguished ancestry, but they are not part of the mainstream orthodoxy and need airing in a world increasingly divided into rich and poor countries. The author also considers the case for a new international economic order which would better serve the needs of developing countries, particularly by stabilising primary product prices and controlling speculative capital flows. Trade and development economists, and policymakers concerned with economic growth and development, will appreciate the original and illuminating research in this book.
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What Reviewers Are Saying
'This book is interesting and important beyond its modest size... it provides a useful overview of, and context for, Thirlwall's important contributions to the macroeconomics of economic growth and the role that the balance of payments plays in this process... Thirlwall's core lessons will leave the reader with a solid foundation for understanding the entrenched macroeconomic problems of our emerging world order.' -- Robert E. Prasch, Review of Political Economy 'The book is an important addition to the current literature on balance-of-payments and exchange-rate policy in developing countries. It offers a view that is different from the standard approach and forces us to reconsider the conventional wisdom. Thirlwall builds on his rich past research and puts out a short and readable book that is very much needed not only in the classroom but also in the offices of policymakers and international institutions.' -- Mohammed Akacem, The Journal of Energy and Development