TAILIEUCHUNG - Lecture Economics (9/e): Chapter 38 - David C. Colander

Chapter 38 - Macro policy in developing countries. After reading this chapter, you should be able to: State some comparative statistics on rich and poor countries, differentiate growth from development and explain how those differences affect macroeconomic policy, explain the particular problems of monetary policy in a developing country context, list seven obstacles facing developing countries. | Rise up, study the economic forces which oppress you They have emerged from the hand of man just as the gods emerged from his brain. You can control them. Paul LaFargue Macro Policy in Developing Countries Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter Goals State some comparative statistics on rich and poor countries Differentiate growth from development and explain how those differences affect macroeconomic policy Explain the particular problems of monetary policy in a developing country context List seven obstacles facing developing countries 2 Developing Countries in Perspective billion people live in developing countries Per capita income in developing countries is around $500 per year compared to nearly $50,000 in the . Americans and Europeans who are classified as poor find it hard to contemplate what life is really like in a truly poor country You can’t judge just an economy; you must judge the entire culture Often economically poor societies have cultures that provide individuals with a deep sense of fulfillment and satisfaction 3 Growth versus Development Development refers to an increase in productive capacity and output brought about by a change in a country’s underlying institutions Development occurs through a change in the production function Growth refers to an increase in output brought about by an increase in inputs, given a production function 4 Differences Between Developed and Developing Economies Different weighting of normative goals due to differences in wealth Developing countries face basic economic needs, like adequate food, shelter, and clothing Differences in institutions Political differences and laissez-faire Dual economy Fiscal systems Financial institutions 5 Differing Institutions Political Differences and Laissez-Faire In many developing countries, institutional checks and balances on government leaders often do not exist In these circumstances, economists who would favor

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