International Finance: Issues of Special Interest for Developing Countries: a Comment

Abstract

Carlos Díaz-Alejandro’s preamble predicts slower growth in industrial countries and at once suggests an area for research: How can the periphery achieve rapid growth in an era of slow growth at the centre? Díaz also notes the opposite direction, the buoying influence of LDC demand on developed country (DC) economies. On the basis of LINK models, UNCTAD has estimated that a 3 per cent increase in growth in the LDCs causes a 1 per cent increase in DC growth. Considering the relative magnitudes of the respective economies this estimate seems grossly exaggerated. More work is needed on both directions of growth linkage between industrial and developing countries.