External Imbalance and Policy Constraints in the 1990s.

This book is a collection of the papers read at the annual conference of the International Economics Study Group (ISEG) at the University of Nottingham in 1992. The theme of the conference was based on one of the most important economic problems of the century, namely the debt crisis of the early eighties. The central theme of the conference was constructed on the fact that the nineties inherited the debt overhang of the eighties. As a result, countries across a wide front are characterized by large imbalances on their balances of payments. This causes limitations to the proper execution of national and international economic policies, but on the other hand it is a challenge to find solutions for this in an attempt to ensure prosperity in world context.

The book consists of two distinctive sections. In chapters two and three a survey is given of the rules of the game in the environment in which imbalances develop on the current accounts of countries. The question concerning the establishment of objectives for a current account as element of macro-economic management is dealt with, as well as the cost and advantages of monetary arrangements such as the European Monetary System (EMS) for macro-economic stability. Chapters four to eleven contain perspectives on aspects of handling imbalance situations on the current accounts of countries, namely (1) the experience of the UK; (2) the relationship between the USA and Japan and the international flow of current account financing between the G7 economies as a whole; and (3) the external positions of selected developing and semi-industrialized countries.

The global problem dealt with in this book concerns the achievement of macro-economic stability which is hampered by the inheritance of the debt crises. Apart from discussing the already familiar subjects in this regard, such as the flow of savings funds between countries, capital mobility, the role and effect of debt reductions and long-term adjustment mechanisms in respect of the balances of payments of countries, new fields for research are also identified, namely the relation between research and development (R and D), innovation and economic achievements. This provides new insights into macro-economic management in general, and dealing with deficits on balances of payments in particular.

The presentation of the research is good, as each subject is given a theoretical foundation with ample references to existing debates and available literature in this regard, whereafter empirical tests are used as explanation, and it is endeavored to reconcile the results with the practical realities. The reader is therefore not left with unachievable objectives. In the case of Sri Lanka and Taiwan, for example, it is shown that their balance of payments imbalances will continue.

Although the book is not necessarily suitable for teaching purposes, it could be used supplementary to lecture material. However, it could be put to very good use as reference and basis for further research on the subjects mentioned above.

Helena van Zyl University of the Orange Free State