International credit and welfare: A paradoxical theorem and its policy implications
نویسندگان
چکیده
This paper considers a developing nation that faces a foreign exchange shortage and hence its demand for foreign goods is limited both by its income and its foreign exchange balance. Availability of international credit relaxes the second constraint. We develop a simple model of strategic interaction between lending institutions and firms, and show that the availability of international credit at concessionary rates can leave the borrowing nation worse off than if it had to borrow money at higher market rates. This ‘paradox of benevolence’ is then used to motivate a discussion of policies pertaining to international lending and the Southern government’s method of rationing out foreign exchange to the importers. r 2005 Elsevier B.V. All rights reserved. JEL classification: L10; F30; O10
منابع مشابه
A Note on: Alternative Quantitative Measurements of Growth and Welfare for Policy Analysis
Measuring development, growth and welfare is an important issue in normative and positive economics.The issue is more critical in developing economies where a good statistical indicator of income, livingstandard or poverty is crucial for decision-makers in corporate, government, non-government andinternational organizations in their for-profit or non-profit plans to promote business and trade, ...
متن کاملEOQ Model for Delayed Deteriorating Items with Shortages and Trade Credit Policy
This paper deals with a deterministic inventory model for deteriorating items under the condition of permissible delay in payments with constant demand rate is a function of time which differs from before and after deterioration for a single item. Shortages are allowed and completely backlogged which is a function of time. Under these assumptions, this paper develops a retailer's model for obta...
متن کاملThe Monetary Policy, Credit Constraint and Spatial Distribution of Economic Activity: A Contribution of New Economic Geography
T his paper investigates the effect of monetary policy on the distribution of economic activity and agglomeration economies within a country. The considered channel for this effectiveness is the availability of credit to firms in various regions and the effects on the labor and consumer welfare. For this purpose, data for manufacturing firms located in 30 different provinces in Iran ...
متن کاملReducing the U.S dependency on oil and gas imports, implications for its policies in the international system
This paper aims to firstly explain the significance of the U.S oil independency and its consequences on the U.S foreign strategy in international politics. Secondly, the implications of this energy policy on the U.S foreign policy in the international system context is examined. The hypothesis to address these inquiries is postulated using neo-realism theory. Accordingly, following oil independ...
متن کاملSome Paradoxical Results with Implications for the Organization of International Lending
This paper models a developing nation that faces a foreign exchange shortage and hence its demand for foreign goods is limited both by its income and its foreign exchange balance. Availability of international credit relaxes the second constraint. It is shown that in this setting the availability of intemational credit at concessionary rates can leave the borrowing nation worse off than if it h...
متن کامل