Date of Submission


Date of Award


Institute Name (Publisher)

Indian Statistical Institute

Document Type

Doctoral Thesis

Degree Name

Doctor of Philosophy

Subject Name

Quantitative Economics


Theoretical Statistics and Mathematics Unit (TSMU-Kolkata)


Sarma, A.

Abstract (Summary of the Work)

In the post-World War Il era, the world saw the birth of many new nations. Primarily, they were the colonies of the industrialized countries and were developed only to supply raw materials to the colonizing country. Rightly, attention was focused to develop the economies of these countries. The ear- lier studies of the economic problems of developing countries has focused on a lack of capital, both physical and human. Rapid progress in solving these problems is scen to be hindered by a number of constrainte-domestic savings, foreign exchange and human skills. In this setup, external finance can further growth by relaxing the first two constraints and promoting an expansion in productive capacity beyond what could be undertaken solely with national savings. Although there was no dearth of critics about the role of foreign capital, most economic theorists in the 1950s and the 19606 accepted that external capital was necessary for accelerating growth and industrialization in the developing countries. Consequently, the policies in most of the developing countries were geared to reduce the impact of ex- ternal shocks on the domestic economy, either by postponing them (with external capital)-thus providing more time for development-or by coun- teracting (through import substituting policies) them.During this period (1950-70) official sources dominated capital flows to developing countries. Along with increasing the volume of aid, the devel- oped countries, during this period increased the concessionality of their aid. Apart from external finance at favourable rates, developing coun- trie also gained in the 1950s and the 1960s from a relatively stable world trading system of fixed exchange rates, preferential trading arrangements and an increasing number of commodity agreements within GATT. Al- though the terms of trade of most developing countries declined slightly during the post-World War II period, these favourable external develop- ments were more than a compensation for the deterioration of the terms of trade. During this period, in spite of cross-country variations, the range of development experience was also good as most of the developing countries experienced moderate to strong growth performances.In the first half of the seventies decade, two shocks hit the international system, which drastically altered the development prospects of the devel- oping countries. The first one, the collapse of the Bretton Woods system of fixed exchange rates, occurred in August 1971 when the US government suspended the fixed-price convertibility of the dollar into gold and other cur- rencies, imposed a 10 percent surcharge on imports and took other measures aimed at eliminating its balance of-payments deficita (prompted by the fi- nancing of Vietnam War). There measures ushered in a new international monetary regime in which at first (August 1971 to 1972) some major cur- rencies were allowed to float (subject to exchange-control regulatione) but by the following year (i.e. 1973), all the currencies were subject to a man- aged float. Since the new international monetary regime could expose the economies of the developing countrics to international price fluctuations,


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This work is licensed under a Creative Commons Attribution 4.0 International License.


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