Economic Development Policy

This extensively revised fifth edition of Economic Development Policy examines policies to promote economic development in low- and middle-income countries. Topics include exchange rate determination, international trade and financial flows, fiscal and monetary policies, agriculture's role in economic development, and domestic financial markets. The book evaluates the successes and failures of those policies, paying close attention to macroeconomic policies of the most rapidly growing economies in East Asia, the problems posed by the big-bang macroeconomics of the transition economies of Eastern Europe, and the poor macroeconomic performance of sub-Saharan Africa and much of South America. The book dissects the waves of financial market/exchange rate crises that swept the developing economies in the Debt Crisis of the 1980s, the Asian Financial Crisis of the 1990s, and the subprime mortgage crisis of 2007 to 2015. To make sense of economic policy reforms in the last three or four decades, one needs to understand economic development policy in the early post-World War II years. The book begins by explaining why development economics first coalesced as a field of study in the 1940s and then analyzes the extraordinary consensus among development economists about why poor countries were poor and what should be done about it. Not surprisingly, the policies that development economists advocated for poor and middle-income countries at the time were not very different from policies that most economists also recommended for high-income countries. The disappointing economic performance of many countries - both rich and poor - in the 1970s together with the extraordinary successes of a few developing countries triggered a search for a new paradigm. The book explains the rationale for that revolution in economic development theory and policy and evaluates its success in promoting economic development.