12.10.07 Brazil Cont

12.10.07 Brazil Cont - Why go along with the IMF? Process...

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Brazil Cont’ 12.10.07 Problems with dependency Definition See notes: Brazil Cont’ 12.5.07 Openness to trade, …. ., and Multination corporations – sign of independency? Difficult to read Solution Dependency offers no way out Empirical verification Relatively little empirical work to test theory Theory kept changing; moving target causing problems for scientists to test Is dependency theory “six feet under”? Role of IMF International Military Fund Created after WWII Stabilize currency values to avoid world depression (like after 1930s) Lender of Last Resort Involvement with IMF means severe economic measures
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Unformatted text preview: Why go along with the IMF? Process Country in severe need of help go to IMF Agreement that with lending, country must right financial situation Why IMF? Reputation (Signaling Device) Negative incentives Banks can make it difficult to carry out business Seizure of national assets Cut debtor off from trade credits Domestic Demand Restraint (stabilization) Restrict credit Interest Rates Rise Cut government expenditures Raise taxes Exchange rate devaluation Price liberalization Discourage imports / encourage exports...
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12.10.07 Brazil Cont - Why go along with the IMF? Process...

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