Re: stiglitz

["Esteban Perez" <eperez@xxxxxxxxxxxx>]

>>> pdavidso <pdavidso@xxxxxxx> 09/09/03 11:32am >>>
 I would have thought also that
since proviso 6 guarantees the recycling of liquidity it could be a channel to
transfer for example FDI flows to finance through the capital and financial
account a current account deficit.
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Except that, in my proposal, I do not recommend forcing a surplus nation to
make FDI -- All  that is required is that they get rid of their excess surplus
in one of three ways (1) importing more, (2) FDI or (3) unilateral transfers.
It is for the government of the surplus nation to decide what is in the best
interests of its residents.
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I am well aware. And that surplus can be spent on any country. It is not directed spending. If it is a source of finance in the example of the country I gave before, it eventually gets there.

However, if a deficit country is faced with a low income elasticity of demand for its exports by the rest of the world  and a high elasticity of demand for its imports from the rest of the world, I am not sure that (1) (exporting more) will allow the country to achieve evetually an external balance. (3) unilateral transfers (official aid) in some countries is a declining source of finances. So that (2) FDI may be the solution.

Does your proposal rule out regional policies?. Would not the level of income disparities among justify regional policies?. Isn't the problem a problem of getting a 'rightly distributed demand rather than greater aggregate demand'? or both? (I put that in quotes becuase it is taken form Keynes CW, VolXXI, p.385, the context is 'to remedy the condition of distressed areas').