The Developing Economies

Volume 35, Number 2 (June 1997)

■ The Developing Economies Volume 35, Number 2 (June 1997)
■ B5
■ 105pp
■ June 1997

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Output-Inflation Tradeoff in China, (143KB) / Hiroyuki Imai

Book Reviews


Hiroyuki Imai, "Output-Inflation Tradeoff in China," pp. 111-41.


High growth and wide fluctuations in fixed investment are the main driving forces causing inflation in China during its economic reform period. Investment expansion generates strong demand pressures in the consumption goods market. Its inflationary impact is magnified further as it brings about higher wage costs during economic booms. In the paper, an implied short-run tradeoff has been derived from the dynamic simulation of a small macroeconomic model. In a given year, each additional percentage point of aggregate output growth or investment growth will bring about a 2.6 or a 0.9 per cent increase, respectively, in the rate of inflation for that year. These estimates suggest that the surge in fixed investment accounts almost fully for the 1993-95 inflationary spell.

Peter G. Warr, "The Uruguay Round and the Developing Countries: Thailand and the Philippines," pp. 142-65.

Studies on the economic impact of the Uruguay Round of the GATT have frequently suggested that all or almost all countries--developed and developing-- will gain. In the present paper it is argued that the number of developing countries which lose from the Round may be much larger than is generally assumed. This issue is discussed in the context of Thailand and the Philippines, two countries generally considered to be so similar for trade analysis purposes that they are often grouped together as if their interests were the same. It is suggested here that Thailand is a net gainer from the Round and the Philippines a net loser.

David Dunham and Saman Kelegama, "Stabilization and Adjustment: A Second Look at the Sri Lankan Experience, 1977-93," pp. 166-84.

Mainstream thinking on economic policy assumes a logical progression from stabilization to liberalization and adjustment that is rarely attainable in practice. Most developing countries have been forced to undertake them simultaneously with a resulting tension between them, and with conflicting demands being made on economic policy. This paper reexamines Sri Lankan economic performance in the 1980s from this perspective. It argues that the pristine application of theory is not an appropriate yardstick and that "economic mismanagement" is at best an incomplete explanation of what was happening. It contends that incompatible demands were at the time being made on economic policy, and stresses the importance of external shocks and the political sustainability of the reform process.

Don P. Clark, "A Diffusion Model of the Process of Implementing the Caribbean Basin Economic Recovery Act," pp. 185-95.

This paper uses a two-stage approach to investigate the process of adopting trade provisions of the Caribbean Basin Economic Recovery Act (CBERA), and to identify factors which influence the dynamic adoption process. First, logistic growth functions of the share of preferential exports in total exports over time are estimated to provide measures of the adoption rate and upper limit participation value for each CBERA beneficiary. The second step relates these estimated parameters to country-specific characteristics to identify factors responsible for intercountry differences in CBERA participation. Results indicate that the process of adopting provisions of a tariff preference scheme mirrors a dynamic diffusion process whereby beneficiaries increase their share of preferential exports in total exports to the United States over time.