Financial constraints on economic development: theory and policy for developing countries

Abstract

This article contains a theoretical and policy analysis of the financial constraints on economic development in developing countries. Following a Keynesian interpretation, it concludes that financial policies are needed to relieve these constraints, given the natural tendency of financial systems to operate in ways that are dysfunctional to economic development.It then proposes three lines of policy that take account of the special characteristics of developing countries: resource allocation policies targeted at segments of strategic importance for economic and financial development; policies to control financial and external fragility; and compensatory policies of a more interventionist cast, in particular directed credit programmes for both public-and private-sector lending to complement resource allocation policies, and countercyclical regulatory barriers so that fragility can be better controlled.

Impact of the banking sector reform in the construction sector

“…Originally, directed credits are policies for enhancing the functionality of financial systems in developing countries according to the Keynesian financial theory (Kohli, 2015). Directed credits are compensatory and aimed at state’s intervention to induce economic development in the face of financial fragility in developing countries (Economic and Political Weekly, 2011; Hermann, 2014). Hermann (2014) outlined the benefits of directed credits as follows.…”

“…Directed credits are compensatory and aimed at state’s intervention to induce economic development in the face of financial fragility in developing countries (Economic and Political Weekly, 2011; Hermann, 2014). Hermann (2014) outlined the benefits of directed credits as follows. First, the policies create long-term funding sources for private or public sector lending.…”

“…In the alternative, the policies make public funding available at below market costs as a way of inducing private sector credit. In the event of an unyielding private sector, the public sector creates development banks – which means that the public sector banks with specific functions in the economic development process (Hermann, 2014). In this manner, the intervention of the public sector in directed credit reform promotes an optimal allocation of resources for development in a developing economy (Miller, 2010).…”

A inserção da América Latina no sistema centro-periferia, no contexto de finanças globalizadas : obervações para México, Brasil e Argentina

“…Para uma interpretação mais completa acerca da inserção das economias periféricas no cenário internacional, no contexto da globalização financeira, é preciso levar em consideração as especificidades tanto das suas estruturas produtivas, discutidas pela Cepal, quanto das suas moedas e sistemas financeiros domésticos, segundo a concepção teórica pós-keynesiana. Nesse sentido, as principais características dos países periféricos que os diferenciam dos países centrais são: (i) baixa competitividade dos seus bens e serviços, decorrente do baixo grau de desenvolvimento relativo dos sistemas nacionais de inovação (Fanjzylber, 2000); (ii) concentração da pauta exportadora em bens primários e da pauta de importação em bens de capital e insumos processados, que tendem a resultar em estrangulamento externo e aumentar a dependência de financiamento externo para a realização de investimentos e, portanto, para o processo de crescimento econômico (Prebisch, 2000a;Furtado, 1983); (iii) reduzida liquidez das moedas nacionais e dos ativos financeiros nelas denominados, que tornam suas respectivas demandas pelos agentes internacionais predominantemente especulativas; e (iv) inserção marginal nos fluxos internacionais de capital; e (v) baixo desenvolvimento do mercado financeiro doméstico, que acentuam sua dependência em relação ao financiamento externo (Hermann, 2014;Studart, 2001Studart, , 1993.…”