12/04/2009

# IFIs
IMF
  - gives shorter-term loans to fix temporary stability problems
  - conditions are perhaps more strict, but not as macroeconomic
WB
  - gives longer-term development loans, technical expertise to help build out
    projects
  - structural adjustmnet loans
    - conditions that country adhere to macoreconomic principles: depeg currency,
      reduce tarrifs, etc.

Can private capital markets find high-return projects.  What would cause lack
  of credit to get to development countries?
  - unlike USA, people don't trust developing countries w/ high deficits
Either need project to be high-return enough that private capital will jump in,
  or need a more stable entity like WB to pay and be forward-thinking enough
  to see why country should pay back.

# Trade
David Ricardo---Comparative Advantage
  - Country A produces 100 product 1 and 50 product 2, while country B produces
    7 product 1 and 3 product 2.  With one unit of labor, country A should make
    all product 1, and country B should make all product 2, and then trade.
  - Advantaged product in each country pulls in entire labor force.

Paul Krugman
  - tons of people want cars
  - country a and b are small, and can't supply world demand
  - so if there are optimally sized firms in each country producting mostly
    similar cars, there will be a desire to trade them.

So is trade uniequivocally good for countries?
  - on average it's good, but there are winners and losers
  - it's worth doing if the net gains are greater than the net losses, and you
    can compensate losers, but that's hardly ever done in developing countries.

Alternatives
  - import substitution
  - tax large companies  (progressive) and inflate economy to "tax" 
    cash economy (regressive).

# Capital Flows

# Aid