This book extends recent theories of incomplete markets to investigate empirically the appropriate balance between the market and the state in the trade relations between developed and developing countries. The conclusion is that in an ideal world government intervention in foreign exchange and trade is necessary in developing countries in the early stages and inevitably decreases as development occurs. Rationing of foreign exchange prevents a 'soft currency distortion' that commonly afflicts developing countries and can turn comparative advantage trade into competitive devaluation trade, with severe losses of income and welfare. Yotopoulos finds that the level of underdevelopment narrowly circumscribes and conditions the extent to which free-market, free-trade, laissez-faire can be beneficial, contrary to the mainstream policy paradigm as currently applied. The analysis and tests draw on empirical research from seventy countries and four extended country studies to confirm the usefulness and validity of the theoretical framework.
The distinguished author of this interesting booklet argues forcibly that currency inflation is one of the root causes of trade collapse, and that only by a policy of steady and continuous deflation can recovery be assured. He urges that value must rule and not be at the sport of currency, varying automatically with the value of gold or, arbitrarily, at the will of the Treasury. Currency inflation, he maintains, is essentially undemocratic, and far more disastrous to the poor than to the rich, who are in a position to escape many of its evil consequences.
This volume asserts that models concerning the outbreak and the propagation of currency crises share many similarities and may therefore be studied together. Theoretical developments in the currency crises literature lead to three distinct types of models. The authors focus on these first, second and third-generation models of currency crises and also discuss the role of the international financial system in preventing currency crises.
"Fans of culinary cozies by Joanne Fluke and Diane Mott Davidson will enjoy discovering Crawford."--Library Journal
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