GDC Working Papers

The paper models the policy challenges facing globalizing developing countries. Models from the pure theory of international trade, the small open economy model, growth accounting, the SolowSwan model, the gravity model, models of portfolio diversification and currency crises models are reviewed to distil policy guidelines to promote the globalization of developing countries. The overriding objective of promoting the globalization of developing countries is to reduce poverty and income inequality between and within countries. Pro and anti-globalizers are currently locked in a heated controversy as to whether the latest wave of globalization has bucked the past trend of increasing poverty and income inequality in developing countries. Anti-globalizers lament that protracted waves of globalization have failed to extricate developing countries from the structural malaise that traps them in a vicious circle of poverty. They advocate the radical reshaping of the international financial architecture to make globalization work for the developing countries by reducing their vulnerability to recurrent financial crises and crisis contagion. The paper concludes by reviewing the geography and institution school research that offers new policy vistas for promoting globalization in developing countries.