The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
F o r R e l e a s e on D e l i v e r y Saturday, October 10, 1970 8:00 p.m., E . D . T . CENTRAL BANKING AND ECONOMIC DEVELOPMENT The Record o f Innovation Remarks by Andrew F . Brimmer Member Board o f Governors o f the F e d e r a l Reserve System At the Tenth A n n i v e r s a r y C e l e b r a t i o n o f the Bank o f Jamaica Sheraton-Kingston Hotel K i n g s t o n , Jamaica October 10, 1970 CENTRAL BANKING AND ECONOMIC DEVELOPMENT The Record o f Innovation By Andrew F . The t e n - y e a r l i f e Brimmer* o f the Bank o f Jamaica coincides a l m o s t p r e c i s e l y w i t h the "Decade o f Development 11 p r o c l a i m e d by the G e n e r a l Assembly o f the U n i t e d N a t i o n s i n 1960. In fact, I u n d e r s t a n d t h a t , when the o r g a n i z a t i o n o f the Bank was b e i n g considered, serious thought was g i v e n t o the p o s s i b i l i t y b i n i n g c e n t r a l b a n k i n g f u n c t i o n s and r e s p o n s i b i l i t y ment f i n a n c i n g i n the same i n s t i t u t i o n . not followed, However, for o f comdevelop- t h a t c o u r s e was and the Bank o f Jamaica has now accumulated a decade o f e x p e r i e n c e Yet, in central i t appears banking. t h a t the Bank has been concerned w i t h problems o f economic development almost as much as i t has w i t h the t r a d i t i o n a l functions by no means s u r p r i s i n g : nomic p r o g r e s s of c e n t r a l banking. this w h i l e Jamaica has made s i g n i f i c a n t i n recent years, it still i n r a i s i n g the s t a n d a r d o f l i v i n g o f i t s task, Of c o u r s e , eco- faces a d i f f i c u l t task citizens. this the Government o f Jamaica has a s s i g n e d a h i g h And t o is priority. * Member, Board o f Governors o f the F e d e r a l Reserve System. I am g r a t e f u l t o s e v e r a l members o f the B o a r d ' s s t a f f f o r a s s i s t a n c e i n the p r e p a r a t i o n o f these remarks. M r s . Dorothy H e l p r i n p r o v i d e d i n f o r m a t i o n on r e c e n t economic developments i n Jamaica. M e s s r s . R o b e r t F . Emery, Yves M a r o n i , and M i c h a e l D. O'Connor conducted the survey o f c e n t r a l b a n k i n g e x p e r i e n c e s i n A s i a , L a t i n A m e r i c a , and i n A f r i c a and the M i d d l e E a s t , r e s p e c tively. M r . Frank O ' B r i e n was e s p e c i a l l y h e l p f u l i n k n i t t i n g t o g e t h e r the d i v e r s e r e g i o n a l e x p e r i e n c e s . -2Thus, the c e l e b r a t i o n o f the f i r s t t e n years o f achieve- ment by the Bank o f Jamaica i s a l s o a good o c c a s i o n to r e v i e w the r o l e w h i c h c e n t r a l banks have g e n e r a l l y p l a y e d i n promoting economic development i n the l a s t decade. point I t a l s o p r o v i d e s a vantage from w h i c h to l o o k ahead t o see what o p p o r t u n i t i e s central banks i n d e v e l o p i n g c o u n t r i e s may have to encourage and a s s i s t the development p r o c e s s i n the 1970's. I n f o c u s i n g on the i n n o v a t i v e s t e p s that central have taken t o h e l p f o s t e r economic development, i n g the f a c t that v i r t u a l l y a l l formed most o f the t r a d i t i o n a l as managing the n o t e i s s u e , government, nation's I am n o t o f these i n s t i t u t i o n s banks overlook- have p e r - c e n t r a l banking functions s e r v i n g as f i s c a l agent f o r -- such the s u p e r v i s i n g the commercial banks, and managing the f o r e i g n exchange r e s e r v e s , exchange c o n t r o l s i n c l u d i n g the o p e r a t i o n i n numerous c o u n t r i e s . Moreover, many o f c e n t r a l banks have c a r r i e d o u t these assignments w i t h of the considerable skill. Nor do I w i s h t o i g n o r e the c r u c i a l contribution that c e n t r a l banks can make t o economic development by a c h i e v i n g and m a i n t a i n i n g - - r e a s o n a b l e s t a b i l i t y i n domestic p r i c e s e q u i l i b r i u m i n the b a l a n c e o f payments. its powers to d i s c h a r g e e f f e c t i v e l y growth. The c o n v e r s e o f t h i s is and A c e n t r a l bank t h a t uses these t r a d i t i o n a l central bank r e s p o n s i b i l i t i e s makes a fundamental c o n t r i b u t i o n to opment because these a r e c o n d i t i o n s -- devel- t h a t encourage and s u s t a i n the f a c t t h a t a c e n t r a l bank -3t h a t does n o t pay adequate a t t e n t i o n t o c r e a t i n g and m a i n t a i n i n g the c l i m a t e f o r growth - - o r one t h a t does n o t have enough pendence t o do so — permitting i t sions i s u n d e r c u t t i n g the cause o f growth, t o be u n d e r c u t by o t h e r s . One o f countries suggests t h a t the n a t i o n s i n t e r n a l s t a b i l i t y and e x t e r n a l b a l a n c e . o f the c o u n t r i e s conclu- developing t h a t have p r o s p e r e d most a r e a l s o the ones t h a t have the b e s t l o n g - t e r m r e c o r d s and e n c o u r a g i n g - - t h a t i n the l a s t or the b a s i c from a survey o f the a c t i o n s o f c e n t r a l banks i n inde- It in maintaining is also significant few years many, perhaps most, t h a t embarked i n the 1950 f s on development grams t h a t were u n r e a l i s t i c tionary i n their effects, i n view o f t h e i r r e s o u r c e s and have s h i f t e d to more r e a l i s t i c proinfla- programs. Most o f them have found the road back to economic r e a l i s m dis- c o u r a g i n g l y l o n g , and some o f them a r e f a r from r e a c h i n g the end of i t yet. Consequently, whatever a d d i t i o n a l r e s p o n s i b i l i t i e s c e n t r a l bank may a c q u i r e , o f economic s t a b i l i t y a i t s b a s i c commitment to the maintenance - - b o t h d o m e s t i c a l l y and e x t e r n a l l y -- s h o u l d n o t be downgraded. I n a s s e s s i n g the r o l e t h a t c e n t r a l banks i n c o u n t r i e s have p l a y e d i n the 1960 f s, several questions developing s h o u l d be raised: - -- Have c e n t r a l banks i n d e v e l o p i n g c o u n t r i e s - w h i l e not ignoring t h e i r t r a d i t i o n a l tasks -taken i n n o v a t i v e steps t o encourage economic development? -4Have these c e n t r a l banks been a b l e t o a l t e r the f l o w o f c r e d i t i n f a v o r o f development needs? - Have they a s s i s t e d i n c r e a t i n g i n s t i t u t i o n s s p e c i f i c a l l y d e s i g n e d to p r o v i d e development finance? - Have c e n t r a l banks i n d e v e l o p i n g c o u n t r i e s succeeded i n e f f o r t s to encourage the m o b i l i z a t i o n o f savings by p r i v a t e f i n a n c i a l institutions? - Have these banks used t h e i r p r o x i m i t y to the c e n t e r s o f p o l i t i c a l power to a d v i s e t h e i r governments as to the importance o f monetary and f i s c a l s t a b i l i t y i n c r e a t i n g a c l i m a t e c o n d u c i v e to investment and economic growth? F i n a l l y , what i s the r e c o r d o f success - - and o f d i s a p p o i n t m e n t — h a r v e s t e d by these c e n t r a l banks i n the s t r u g g l e f o r economic development? To answer these q u e s t i o n s , of a comprehensive survey was made the s p e c i a l e f f o r t s made by c e n t r a l banks i n d e v e l o p i n g t o o r i e n t economic growth toward the g o a l s o f economic F o r the purpose of under this discussion, four headings: these e f f o r t s the m o b i l i z a t i o n o f s a v i n g s , development f i n a n c e i n s t i t u t i o n s , Before proceeding f u r t h e r , references instance, to p a r t i c u l a r my purpose i s countries development. can be grouped the f o s t e r i n g the a l l o c a t i o n o f c r e d i t opment, and a d v i c e on the development for invidious comparison. I n every the g e n e r a l range and p a t t e r n s i n g l e d out as a t a r g e t devel- for c r i t i c i s m or The c o n d i t i o n s mentioned a r e o f t e n w i d e s p r e a d . However, w i t h o u t s p e c i f i c collection devel- I must e x p l a i n the numerous o f measures adopted by c e n t r a l banks to h e l p promote economic opment, and no c o u n t r y i s of process. i n the comments below. to i l l u s t r a t e countries illustrations, of miscellaneous we would be l e f t w i t h a generalizations. -5M o b i l i z a t i o n o f Domestic Savings While external c a p i t a l , sources, from e i t h e r p u b l i c or can speed the development e f f o r t , must depend p r i m a r i l y on i t s the d e v e l o p i n g own r e s o u r c e s . To the e x t e n t domestic s a v i n g s a r e made a v a i l a b l e the p r o s p e c t s ment a r e enhanced. for noninflationary Thus, for real estate, development f i n a n c i n g or d e v e l o p - c o n t r i b u t i o n through p o l i c i e s which encourage s a v i n g s lenders, importance. the c e n t r a l bank can make a home and t o f l o w t o f i n a n c i a l country T h i s b e i n g the c a s e , the m o b i l i z a t i o n o f domestic s a v i n g s i s o f fundamental purposes, private significant to remain a t i n s t i t u t i o n s and away from money and o t h e r s p e c u l a t i v e a c t i v i t y . savers must be a s s u r e d as to the l i q u i d i t y i s s u e d by f i n a n c i a l i n s t i t u t i o n s o f the instruments in return for their w e l l as about the soundness o f the i n s t i t u t i o n s Moreover, funds - - as themselves. Once the q u e s t i o n o f s a f e t y i s answered, a t t r a c t e d by the promise o f r e a s o n a b l e e a r n i n g s . savings Thus, the i n t e r e s t r a t e on s a v i n g s d e p o s i t s must be c o m p e t i t i v e w i t h n a t i v e uses o f f u n d s . However, i n the h i g h l y environment o f many d e v e l o p i n g c o u n t r i e s , to f i n a n c i a l i n s t i t u t i o n s are alter- inflationary savings w i l l not - - t h a t c o u l d make them a v a i l a b l e flow for p r o d u c t i v e investment - - u n l e s s i n t e r e s t r a t e s a r e h i g h enough t o yield realistic earnings i n the f a c e o f i n f l a t i o n . T h i s means t h a t the r a t e o f i n t e r e s t s h o u l d be " p o s i t i v e 1 1 i n the sense it exceeds the r a t e o f inflation. that -6Where d e p o s i t of savings r a t e s are n e g a t i v e into financial institutions is in this sense, the r e s t r i c t e d t o a few flow special cases - - such as d e p o s i t s by i n d i v i d u a l s w i t h no o t h e r means o f ing t h e i r actions, f u n d s , by those who use s a v i n g s a c c o u n t s and by those who d e p o s i t g a i n i n g a c c e s s t o bank c r e d i t . o f f e r higher rates, for current funds f o r s p e c i a l p u r p o s e s , I n the meantime, o t h e r such as f i n a n c e companies, credit holdtrans- such as institutions cooperatives, mortgage banks and the mortgage departments o f commercial banks. this respect, a positive or one s h o u l d n o t e t h a t In the Jamaican a u t h o r i t i e s have s t e p by f r e e i n g i n t e r e s t taken r a t e s on time d e p o s i t s o f s i x months over. I n A f r i c a and the M i d d l e E a s t c e n t r a l banks a r e strictly generally l i m i t e d - - i n terms both o f time and amounts - - i n the e x t e n t t o w h i c h t h e y can lend t o governments. f y i n g c e r t a i n asset ratios, However, by c e n t r a l banks i n t h i s p a r t of specithe w o r l d have channeled a share o f p r i v a t e s a v i n g s t o governments so t h a t they c o u l d be used f o r the purpose o f development. -- Included i n the c o m p o s i t i o n o f almost a l l such r a t i o s were s h o r t - t e r m government o b l i g a t i o n s . credit or G i v e n the f a c t is often quite slack, i n v e s t abroad - - i f such l i q u i d i t y that i n A f r i c a p r i v a t e demand f o r commercial banks might h o l d i d l e they d i d not h o l d T r e a s u r y b i l l s t h a t c o u l d be made a v a i l a b l e would not be d e s i r a b l e under a l l r a t i o becomes an i n s t r u m e n t t i o n s o f governments, satisfy ratios. W h i l e t h i s has been a s u c c e s s f u l me^ns o f savings to funds it mobilizing f o r development p u r p o s e s , circumstances. If the f o r e n s u r i n g a market f o r can l o s e some of i t s it liquidity the obliga- u s e f u l n e s s as a -- -7monetary t o o l . Further, i n an economy i n w h i c h c r e d i t is tight, such m o b i l i z a t i o n o f funds would squeeze the p r i v a t e s e c t o r from w h i c h the b u l k o f investment g e n e r a l l y comes. The Bank o f I s r a e l has encouraged the development o f a wide v a r i e t y o f i n s t r u m e n t s a t t r a c t i v e to savers. i n c l u d e d e p o s i t s denominated i n d o l l a r s , p r i c e i n d e x f o r v a l u e maintenance, ceilings on i n t e r e s t r a t e s . p r i v a t e savings r a t e . deposits and, r e c e n t l y , These measures t i e d to full removal o f The r e s u l t was an u n u s u a l l y I n B r a z i l and C h i l e , the high the v a l u e o f financial i n s t r u m e n t s has f r e q u e n t l y been l i n k e d t o a p r i c e i n d e x to o v e r come the d i s a b i l i t i e s In Asia, o f low i n t e r e s t rates. s e v e r a l c e n t r a l banks i n r e c e n t years have p l a y e d a major r o l e i n the m o b i l i z a t i o n o f s a v i n g s f o r development through d r a m a t i c r e f o r m o f a r c h a i c i n t e r e s t r a t e s t r u c t u r e s . b e s t example i s t h a t o f Korea, where i n 1965 i n t e r e s t r a t e s d e p o s i t s were i n c r e a s e d s h a r p l y - case o f one-year bank d e p o s i t s . also raised substantially. The on from 15 t o 26 per c e n t i n the Commercial bank l o a n r a t e s were T h i s reform, s u p e r v i s e d by the Bank o f Korea, was f o l l o w e d by an i n c r e a s e i n the n a t i o n a l savings from 7 per c e n t i n 1964 to 16 per c e n t i n 1969, and p r e s s u r e s were s i m u l t a n e o u s l y reduced. In this rate inflationary period also, emerged as a c o u n t r y w i t h an e x c e p t i o n a l l y h i g h r a t e o f Korea economic growth, a v e r a g i n g 11 per c e n t per year from 1964 to 1969. The l e s s o n from t h i s body o f e x p e r i e n c e suggests that c e n t r a l banks might l o o k t o r a i s i n g the r e a l r e t u r n t h a t the banking -8system i s a b l e t o p r o v i d e to the o r g i n a r y saver - - i f more r e s o u r c e s a r e to be m o b i l i z e d to f i n a n c e the investment f o r economic local required development. One o f the major o b s t a c l e s to channeling p o t e n t i a l t o investment i n d e v e l o p i n g c o u n t r i e s the l a c k o f l i q u i d i t y of financial assets. A number o f c o u n t r i e s have adopted measures to e n a b l e an i n v e s t o r to l i q u i d a t e h i s holdings - - without prohibitive capital losses. is savings M e x i c o p r o v i d e s an o u t s t a n d i n g example o f a c t i o n i n t e n d e d to a s s u r e the l i q u i d i t y a commitment by i s s u i n g i n s t i t u t i o n s government, savings. financial and, u l t i m a t e l y , institutions bidding t h i s meant g u a r a n t e e i n g t h a t these to the for institusavers. the development o f a l m o s t e v e r y type o f c a p i t a l market i n s t i t u t i o n enhances the l i q u i d i t y instruments. involved maturity. t i o n s w o u l d always be a b l e t o meet t h e i r o b l i g a t i o n s Of c o u r s e , This their of t h e i r the N a c i o n a l F i n a n c i e r a , s t o o d b e h i n d the f i n a n c i a l In effect, of savings. to repurchase i n s t r u m e n t s a t par a t any time r e g a r d l e s s The Bank o f M e x i c o , incurring C o u n t r i e s such as the P h i l i p p i n e s , of financial India, and M a l a y s i a have r a t h e r advanced c a p i t a l markets, where funds can be m a r s h a l l e d and channeled f o r development p u r p o s e s . Bank o f the P h i l i p p i n e s has p l a y e d a major r o l e i n d e v e l o p i n g an open p r i m a r y and secondary market i n T r e a s u r y b i l l s . of course, interest requires The C e n t r a l t h a t governments be w i l l i n g Such a c t i o n , t o pay the h i g h e r costs associated w i t h a free Treasury b i l l market. -9The c r e a t i o n o f e f f i c i e n t p r i a t e ) would i n c r e a s e the l i q u i d i t y s t o c k exchanges of f i n a n c i a l However, where such exchanges do e x i s t inadequate p u b l i c d i s c l o s u r e of (where appro- investments. i n some d e v e l o p i n g countries, f i n a n c i a l d a t a on l i s t e d f i r m s a p r i n c i p a l h o l d b a c k t o the e x p a n s i o n o f s e c u r i t i e s markets. is In the case o f the combined s t o c k exchange o f M a l a y s i a and S i n g a p o r e , e x t e n s i v e p u b l i c d i s c l o s u r e has been a p r i n c i p a l the exchange o u t s t a n d i n g l y s u c c e s s f u l . and t h e i r factor i n making Other d e v e l o p i n g c e n t r a l banks, p o n d e r i n g how t o i n c r e a s e the countries, availability o f funds f o r i n v e s t m e n t , might w e l l study t h i s example. Other p r o m i s i n g areas would appear t o be development o f a T r e a s u r y bill market and markets f o r commercial p a p e r . I n a d d i t i o n t o a c t i o n to i n c r e a s e the a t t r a c t i v e n e s s s a v i n g s and t o ensure adequate l i q u i d i t y , age s a v i n g i n a t l e a s t deposit insurance. c e n t r a l banks may e n c o u r - two o t h e r ways - - b o t h aimed a t savers as t o the s e c u r i t y o f of their deposits. reassuring One i s by means o f The o t h e r i s e x a m i n a t i o n o f banks w i t h the o b j e c t i v e o f e n f o r c i n g standards o f sound b a n k i n g . C e n t r a l Bank A s s i s t a n c e I n some p l a c e s to Development Institutions - - the L a t i n American c o u n t r i e s provide a r a t h e r w i d e s p r e a d example - - c e n t r a l banks were founded to p r o v i d e commercial banking, and some o f them have even been g i v e n specific development b a n k i n g assignments. Over time, t h e r e has been a s e p a r a t i o n o f these f u n c t i o n s , indicated that t h e i r since however, experience l o c a t i o n i n one i n s t i t u t i o n tended t o produce -10conflicts o f i n t e r e s t and to i n t e r f e r e w i t h the e f f e c t i v e o f c e n t r a l banking f u n c t i o n s . But t h i s s e p a r a t i o n does n o t mean t h a t c e n t r a l banks have p l a y e d no r o l e i n the growth o f banking i n s t i t u t i o n s . appropriateness opment l e n d i n g i n s t i t u t i o n s , their securities, development C e n t r a l banks - - w i t h v a r y i n g degrees and e f f e c t i v e n e s s development banks. performance - - have p r o v i d e d c a p i t a l such as a g r i c u l t u r a l and They have extended c r e d i t for devel- industrial t o them, purchased or h e l p e d to c r e a t e a market f o r t h e i r I n Colombia, B o l i v i a , of securities. Ecuador, Guatemala, J a m a i c a , Mexico, I n d i a , A f g h a n i s t a n - - and q u i t e g e n e r a l l y i n A f r i c a - - c e n t r a l banks have s u b s c r i b e d to some p a r t , u s u a l l y a minor p a r t , c a p i t a l o f developmental i n s t i t u t i o n s . t e c h n i q u e has had o n l y l i m i t e d u s e . o f the equity However, on the w h o l e , T h i s i s as i t s h o u l d be, heavy dependence upon c e n t r a l banks f o r p r o v i s i o n o f e q u i t y would have been i n f l a t i o n a r y . ment i n s t i t u t i o n s governments, In general, i s best that be f i n a n c e d by n o n c e n t r a l bank s o u r c e s , intergovernmental agencies, whose funds r e p r e s e n t and p r i v a t e capital develop- including investors, to development i n s t i t u t i o n s banks i s s u b j e c t t o the same d i f f i c u l t y . l o a n s a r e renewed, and a r e never r e p a i d , by To the e x t e n t t h a t they assume the o f a c a p i t a l c o n t r i b u t i o n t h a t does n o t come out o f i n L a t i n America, obligations central the charactersavings. Much the same can be s a i d o f the f a i r l y w i d e s p r e a d p r a c t i c e , ularly because savings. Extension of c r e d i t istics it this partic- o f d i r e c t purchase by c e n t r a l banks o f i s s u e d by development f i n a n c e institutions. the -11Iri v i e w o f this inflationary potential, have turned to l e s s d i r e c t - - and l e s s some c e n t r a l banks inflationary h e l p i n g development f i n a n c e i n s t i t u t i o n s raise has been done i n E l S a l v a d o r , Dominican R e p u b l i c , Argentina, and Honduras. Guatemala, In a l l their - - methods capital. of This except one o f these c o u n t r i e s , the c e n t r a l bank has attempted to c r e a t e a market f o r the s e c u r i t i e s development f i n a n c e i n s t i t u t i o n s attempted t o do so, the use o f p r o f i t s At various of v a r i o u s k i n d s . times over s e v e r a l decades, through the use o f r e p u r c h a s e In general, it banks i n A r g e n t i n a , bank. Guatemala, investments commitments. seems t h a t c e n t r a l banks i n c o u n t r i e s have n o t exhausted t h e i r t o make markets f o r developing f i n a n c i a l expertise i n to make a c o n t r i b u t i o n i n t h i s a r e a . tutions including o f the c e n t r a l and Honduras have t r i e d to i n c r e a s e the l i q u i d i t y o f that e f f o r t s They have i n more or l e s s n o n i n f l a t i o n a r y ways - from the o r d i n a r y o p e r a t i o n s of As an example, the s e c u r i t i e s it trying appears o f development (which have been e x p l o r e d o n l y t e n t a t i v e l y ) insti- might be reopened, w i t h g r e a t e r d e t e r m i n a t i o n and w i t h more s t r e s s on ways t o keep securities lodged i n p r i v a t e hands. I t might a l s o be asked whether the guarantee i n s t r u m e n t c o u l d be put t o e f f e c t i v e use h e r e , opening a l i n e t o c e n t r a l bank r e s o u r c e s t i o n a r y funds i n t o the economy. t h a t would c h a n n e l without infla- -12A l l o c a t i o n of- C r e d i t f o r Development Purposes I n a s u b s t a n t i a l number o f d e v e l o p i n g c o u n t r i e s , commercial banks a r e f o r e i g n - o w n e d , and most o f them t r a d i t i o n a l l y have c o n c e n t r a t e d on f i n a n c i n g f o r e i g n t r a d e and domestic I n the f a c e of t h i s situation, attempted t o i n f l u e n c e the f l o w o f commercial bank c r e d i t away The c e n t r a l banks o f L a t i n America, A s i a , and v a r i e d , commerce. a number o f c e n t r a l banks have from such t r a d i t i o n a l uses and toward c a p i t a l development extensive, the efforts projects. and A f r i c a have a l l made in this direction. In fact, p r o b a b l y i n t h i s a r e a t h a t the g r e a t e s t amount o f c e n t r a l it banking e x p e r t i s e and e f f o r t has been expended w i t h the o b j e c t i v e of moting economic pro- development. W i t h the a l l o c a t i o n o f c r e d i t i n mind, differential d i s c o u n t r a t e s have been used i n a l a r g e number o f c o u n t r i e s . L a t i n America, Costa R i c a , these i n c l u d e A r g e n t i n a , the Dominican R e p u b l i c , I n the M i d d l e E a s t and A s i a , Pakistan, is the P h i l i p p i n e s , Israel, Bolivia, Ecuador, India, Brazil, In Colombia, P e r u , and V e n e z u e l a . Indonesia, Korea, the R e p u b l i c o f China, and T h a i l a n d have a l s o employed d i f f e r e n t i a l discount rates. Ordinarily, the c e n t r a l bank charges a p r e f e r e n t i a l r a t e on d i s c o u n t s o r advances against f a v o r e d types o f paper to induce the commercial banks increase t h e i r activities l e n d i n g or to reduce the c o s t o f i n w h i c h t h i s paper originates. funds t o those to -13E x p e r i e n c e suggests t h a t the use o f d i f f e r e n t i a l has n o t been u n i v e r s a l l y successful. The p o t e n t i a l for rates effecting a change i n the p a t t e r n o f l e n d i n g by the use o f m u l t i p l e discount r a t e s would i n c r e a s e as r e c o u r s e to c e n t r a l bank c r e d i t by the commercial banks became more e x t e n s i v e . frustrate efforts to pursue a r e s t r i c t i v e But i t could seriously credit policy at when such a p o l i c y may be needed on o v e r a l l economic times grounds. S e v e r a l c e n t r a l banks have sought to a l l o c a t e c r e d i t the e s t a b l i s h m e n t o f p o r t f o l i o ceilings. This by t e c h n i q u e has been used i n Costa R i c a c o n t i n u o u s l y s i n c e 1948, and t o some e x t e n t Colombia. I t has a l s o been used i n the P h i l i p p i n e s , the Congo ( K i n s h a s a ) . Nigeria, in and The Costa R i c a n r e g u l a t i o n s p r o v i d e an o v e r a l l c e i l i n g f o r each bank w i t h s e p a r a t e s u b c e i l i n g s on loans f o r major economic s e c t o r s and on some s u b s e c t o r s . have h e l p e d t o change the p a t t e r n o f c r e d i t flows, The system may although the d a t a a r e s u b j e c t to q u e s t i o n s as t o the a c c u r a t e c l a s s i f i c a t i o n some o f the commercial bank l o a n s . i n use b r i e f l y of The Colombian system, w h i c h was i n the e a r l y 1 9 6 0 f s , may a l s o have had some e f f e c t on the p a t t e r n o f c r e d i t a l l o c a t i o n . d i s c o n t i n u e d suggests f i e d w i t h the r e s u l t s , But the f a c t t h a t i t was t h a t the Colombian a u t h o r i t i e s were or t h a t the d i f f i c u l t i e s were too g r e a t i n v i e w o f the r e s u l t s dissatis- of securing compliance achieved. C e n t r a l banks i n d e v e l o p i n g c o u n t r i e s have made e x t e n s i v e use o f r e s e r v e requirements as a t o o l o f monetary management. number o f these i n s t i t u t i o n s requirements have l i n k e d d i f f e r e n t i a l A reserve to the c o m p o s i t i o n o f commercial bank p o r t f o l i o s to -14- influence the a l l o c a t i o n o f c r e d i t . This employed i n an e l a b o r a t e way i n M e x i c o . t e c h n i q u e has been Commercial banks a r e a l l o w e d t o m a i n t a i n a lower cash r e s e r v e r a t i o , p r e s c r i b e d percentages of t h e i r p o r t f o l i o types o f l o a n s o r i n v e s t m e n t s . consist of specified emphasis from one type o f P o r t f o l i o r a t i o s associated with reserve have a l s o been used to some e x t e n t i n A r g e n t i n a , Colombia, that The p r e s c r i b e d percentages may be changed as the c e n t r a l bank s h i f t s to another. provided the Dominican R e p u b l i c , and P e r u . loan requirements Brazil, Chile, I n Colombia, the system was combined w i t h a secondary r e s e r v e requirement under w h i c h the banks were t o h o l d s p e c i f i e d bonds o f the S t a t e Agricul- t u r a l I n d u s t r i a l and M i n i n g Bank. The M e x i c a n a u t h o r i t i e s results o b t a i n e d under t h e i r over 20 y e a r s . They b e l i e v e appear to be s a t i s f i e d w i t h system,which has been i n use for t h a t the system was i n s t r u m e n t a l i n d u c i n g commercial banks t o take an i n t e r e s t i n types o f the in produc- t i v e l o a n s w h i c h they had n o t made because o f i n e r t i a or f o r c e habit. Furthermore, t h e r e seems t o be a f e e l i n g t h a t , of s i n c e banks have become accustomed to making such l o a n s and have them to be remunerative, of the they may w e l l c o n t i n u e such l e n d i n g i n the absence regulation. The import d e p o s i t requirement t e c h n i q u e (primarily i n t e n d e d to d e a l w i t h b a l a n c e o f payments d i f f i c u l t i e s ) been employed by some c e n t r a l banks to i n f l u e n c e o f commercial bank c r e d i t . Generally, the has also allocation the d e p o s i t s a r e required -15t o be h e l d by the c e n t r a l bank. Alternatively, the commercial banks a r e r e q u i r e d t o h o l d w i t h the c e n t r a l bank r e s e r v e s t o the d e p o s i t s . Imports f o r development purposes and o t h e r t i a l needs may be f a v o r e d w i t h a low r e q u i r e m e n t , The import d e p o s i t requirement t e c h n i q u e e n t i a l r a t e s ) has been used i n A r g e n t i n a , B r a z i l , Ecuador, Indonesia, Pakistan, Paraguay, essen- and a p r o g r e s s i v e l y h i g h e r r e q u i r e m e n t may be a p p l i e d as the e s s e n t i a l i t y o f diminishes. equal the (with Chile, the P h i l i p p i n e s , imports differ- Colombia, Uruguay, and Vietnam. As a t e c h n i q u e to i n f l u e n c e the a l l o c a t i o n o f under a p o l i c y o f promoting economic development, the credit import d e p o s i t scheme may l e a v e domestic p r o d u c e r s o f n o n e s s e n t i a l and l u x u r y goods w i t h ready a c c e s s t o c r e d i t . I t may a l s o domestic p r o d u c e r s o f a l l goods s u b j e c t to the import provide deposit r e q u i r e m e n t w i t h a degree o f p r o t e c t i o n a g a i n s t imports t h a t may n o t be needed i n the l o n g r u n . Virtually a l l c e n t r a l banks i n the A f r i c a n and M i d d l e E a s t r e g i o n s have taken s t e p s t o i n f l u e n c e the f l o w o f bank l o a n s to p r i o r i t y o r f a v o r e d a c t i v i t i e s w i t h i n the p r i v a t e s e c t o r . n i q u e s used i n c l u d e c r e d i t g u i d e l i n e s , ceilings, quantitative rediscount d i r e c t a p p r o v a l o f bank l o a n s , and s e l e c t i v e liquidity ratios. C o u n t r i e s u s i n g one or s e v e r a l o f these t e c h n i q u e s Nigeria, the I v o r y Coast, T u n i s i a , In general, quantitative the p r a c t i c e controls. Congo ( K i n s h a s a ) , Tech- include and I s r a e l . i n the r e g i o n i s r e p l e t e w i t h d i r e c t and -16The r e s u l t s However, a t l e a s t i n the Congo ( K i n s h a s a ) , c e n t r a l bank c o n t r o l s significantly o f these e f f o r t s appear t o be mixed. d i r e c t and q u a n t i t a t i v e seem t o have been s u c c e s s f u l i n increasing the amount o f c r e d i t extended to a g r i c u l t u r e r e d u c i n g the amount i n t e n d e d to f i n a n c e while imports. The Bank o f I s r a e l has p r o b a b l y gone as f a r as any i n s t i t u t i o n i n encouraging favorable Controlled credit is terms f o r development lending. extended a t about 9 p e r c e n t , whereas ordinary bank c r e d i t c o s t s about 17 p e r c e n t . I n recent years, credit c o n t r o l l e d by the Bank o f I s r a e l has r e p r e s e n t e d about 30 p e r o f a l l bank c r e d i t o u t s t a n d i n g to the p r i v a t e s e c t o r . controlled credits include rediscounts, cent These s p e c i f i e d loans which g i v e the bank an exemption from l i q u i d i t y r e q u i r e m e n t s , and c r e d i t s g r a n t e d on the b a s i s o f d e p o s i t s r e c e i v e d under approved s a v i n g s schemes. I n a number o f i n s t a n c e s , specific c e n t r a l banks have g i v e n - - and i n some cases q u i t e d e t a i l e d - - guidance w i t h r e s p e c t to the d e s i r e d c o m p o s i t i o n o f the commercial banks 1 portfolios. The C e n t r a l Bank o f the P h i l i p p i n e s such a p r a c t i c e s i n c e A p r i l i n t o four p r i o r i t y 1957. categories, has A l l bank l o a n s a r e w i t h those i n the more loan followed classified essential l o a n c a t e g o r i e s b e i n g g i v e n p r e f e r e n c e i n c e n t r a l bank r e d i s c o u n t ing operations. In addition, l o a n s i n the two l o w e s t , maximum c e i l i n g s a r e imposed on less essential categories. -17The c o n c l u s i o n reached on the b a s i s o f the d i s c u s s i o n seems c l e a r : a few attempts to a l l o c a t e c r e d i t development purposes seem t o have been p a r t i c u l a r l y But, on the whole, foregoing for successful. the r e s u l t s have been r a t h e r mixed. The C e n t r a l Bank as Development A d v i s e r S e r v i n g as a d v i s e r to governments i s one o f the and most w i d e s p r e a d r o l e s o f c e n t r a l b a n k i n g . economic development, this role domestic s t a b i l i t y , policies; t a i n i n g external balance; resources; (1) p o l i c i e s i n view o f the c o u n t r y ' s economic and factors cli- foreign. specific adviser to p a r t i c u l a r However, a survey o f c e n t r a l bank e x p e r i e n c e s t h a t the r e l a t i v e plans financial a f f e c t i n g the How a c e n t r a l bank performs as a development t u r n on a v a r i e t y o f fiscal (3) the f o r m u l a t i o n o f development and (4) the broad range o f p o l i c i e s c l e a r l y suggests for w i t h the o b j e c t i v e o f main- mate f o r investment - - b o t h domestic and will of significance. w i t h p a r t i c u l a r emphasis on a p p r o p r i a t e (2) exchange r a t e p o l i c y , that are f e a s i b l e I n the c o n t e x t takes on s p e c i a l A d v i c e i s p a r t i c u l a r l y needed i n f o u r a r e a s : oldest in this countries. regard freedom from involvement i n day- t o - d a y debates on economic p o l i c y has been c r u c i a l . In general, where the c e n t r a l bank has been a l l o w e d to m a i n t a i n a r e a s o n a b l e degree o f detachment, r e s p e c t e d - - even i f rule, i t s a d v i c e has tended to be o b j e c t i v e — n o t always r e c e i v e d w i t h enthusiasm. the c e n t r a l bank i s likely and As a t o be a w e l l - e q u i p p e d i n s t i t u t i o n -- -18- w i t h r e s p e c t t o s t a f f and f i n a n c i a l r e s o u r c e s r e s e a r c h and a n a l y s i s must -- to u n d e r t a k e on w h i c h a w e l l c o n c e i v e d development the plan rest. The o p p o r t u n i t i e s open t o a c e n t r a l bank t o a d v i s e government w i l l a l s o depend on the type o f o v e r a l l c r e a t e d t o f o r m u l a t e and execute the p l a n . organization In countries s t r o n g p l a n n i n g commissions o r development m i n i s t r i e s , p e r m i t t e d to the c e n t r a l bank may n o t be v e r y w i d e . whole, the with the scope But, on the the e v i d e n c e suggests t h a t i n many c o u n t r i e s the c e n t r a l bank i s a s e n i o r p a r t n e r i n the development Moreover, the p a r t i c u l a r role enterprise. the c e n t r a l bank can p l a y w i l l be i n f l u e n c e d by the type o f development p l a n adopted by the government. Where, as i n I n d i a , t h e r e i s emphasis upon d i r e c t c h a n n e l i n g o f economic r e s o u r c e s from b o t h the p r i v a t e and the public sectors advice i s f o r the purpose o f development, critical i n every r e s p e c t . Where, as i n Korea, development p l a n c o n s i s t s m a i n l y o f g o a l s to achieve, o p e r a t i n g under a r e l a t i v e l y c e n t r a l bank's s p e c i f i c sector f r e e market system, the on the investment. the e v i d e n c e suggests t h a t c e n t r a l banks have g e n e r a l l y been a good source o f a d v i c e to t h e i r on problems o f economic development. bank's the f o r the p r i v a t e r o l e may be f o c u s i n g e s s e n t i a l l y a d o p t i o n o f measures t o encourage p r i v a t e In conclusion, the c e n t r a l governments However, i n some c o u n t r i e s -- e s p e c i a l l y where the o v e r a l l p l a n n i n g machinery i s q u i t e e l a b o r a t e the c e n t r a l bank may share the a d v i s o r y r o l e w i t h o t h e r -- institutions. -19The method o f s h a r i n g v a r i e s g r e a t l y it i s h a r d to make an assessment o f from c o u n t r y t o c o u n t r y , the o v e r a l l C e n t r a l Banking and Economic Development i n the and results. 1970 f s Having surveyed the r o l e o f c e n t r a l banks i n developing c o u n t r i e s d u r i n g r e c e n t y e a r s , we s h o u l d now t r y t o l o o k ahead to see what c o u r s e they may be expected t o f o l l o w i n the decade. It a b i l i t y of current i s my i m p r e s s i o n t h a t e x p e c t a t i o n s about the f o r e i g n a s s i s t a n c e a r e much l e s s o p t i m i s t i c avail- today than they were i n 1960 when the G e n e r a l Assembly o f the U n i t e d N a t i o n s p r o c l a i m e d a "Decade o f Development. 11 The Assembly s t a t e d that: " . . . the f l o w o f i n t e r n a t i o n a l a s s i s t a n c e and c a p i t a l s h o u l d be i n c r e a s e d s u b s t a n t i a l l y so as t o r e a c h . . . a p p r o x i m a t e l y 1 per c e n t o f the combined n a t i o n a l incomes o f the econ o m i c a l l y advanced c o u n t r i e s . 1 1 T h i s was a t a r g e t f o r the t o t a l f l o w o f p r i v a t e and o f f i c i a l . i n 1964, resources, I t was endorsed by the i n d u s t r i a l through the Development A s s i s t a n c e Committee (DAC) o f O r g a n i z a t i o n f o r Economic C o o p e r a t i o n and Development. f i v e years b e f o r e 1964, the t a r g e t was exceeded. development a i d by the DAC c o u n t r i e s r o s e o n l y s l i g h t l y , I n the official in dollar from j u s t over $6 b i l l i o n i n 1964 t o $6.7 b i l l i o n i n 1969. I n terms o f percentage o f g r o s s n a t i o n a l p r o d u c t , decline -- t h i s was a from a p p r o x i m a t e l y 0.5 per c e n t i n 1964 to j u s t 0.3 per c e n t i n 1969. the But i n the con- c l u d i n g f i v e years o f the decade, n e t disbursements o f terms, nations over -20In contrast, tially. the f l o w o f p r i v a t e r e s o u r c e s r o s e Net disbursements p r i v a t e export c r e d i t s , from $3.2 b i l l i o n T h i s was a r i s e , of private substan- investors, together with n e a r l y doubled i n d o l l a r terms - - rising i n 1964 t o s l i g h t l y more than $6 b i l l i o n i n 1969. i n terms o f p e r c e n t a g e o f the aggregate gross n a t i o n a l p r o d u c t o f DAC c o u n t r i e s , from 0.26 per c e n t i n 1964 to about 0.33 per c e n t i n 1969. i n c r e a s e i n the f l o w o f This investment from the DAC n a t i o n s was almost l a r g e enough t o the s h o r t f a l l i n o f f i c i a l transfers. Therefore, r e s o u r c e s moving to d e v e l o p i n g c o u n t r i e s , n a t i o n a l product, private declined only s l i g h t l y . f l o w s accounted f o r t w o - t h i r d s from $9.14 b i l l i o n total for the s h o r t f a l l a s s i s t a n c e can be t r a c e d to a number o f financial as a p e r c e n t a g e o f Moreover, gross the r i s e in o f the a b s o l u t e i n c r e a s e in official factors. -- -- while public resistance stronger -- s e r i o u s l y to higher development Widespread i n f l a t i o n a r y p r e s s u r e s c r e a t e d by excess demand i n industrialized taxes was becoming l i m i t e d the amount o f budget r e s o u r c e s c o u l d be made a v a i l a b l e . In addition, some o f the p r i n c i p a l c o u n t r i e s were a l s o p l a g u e d by b a l a n c e o f payments d e f i c i t s , reductions offset i n 1964 to $13.30 b i l l i o n i n 1969. The reasons countries private i n f o r e i g n a s s i s t a n c e were a v i s i b l e means o f that donor and registering improvements. Expressed d i f f e r e n t l y , t h e r e has emerged a worldwide shortage of c a p i t a l , a r i s i n g from a s t r o n g d r i v e s o c i a l advancement. The p r e s s u r e f o r the use o f c a p i t a l f o r economic and to -21f i n a n c e these improvements has become as i n t e n s e i n the c o u n t r i e s as i t is i n the d e v e l o p i n g n a t i o n s . industrialized This shortage of funds cannot be expected to d i s a p p e a r a t any time soon, and i t forcing nearly a l l countries l i g h t of p o l i t i c a l realities. i n g l y are r e g i s t e r i n g to reexamine p r i o r i t i e s In t h i s the f i r s t light, is i n the h a r s h home needs increas- - - and s t r o n g e s t - - c l a i m s on resources. A g a i n s t t h i s background, the Pearson Commission, by the W o r l d Bank, recommended t h a t the DAC governments double t h e i r o f f i c i a l a s s i s t a n c e d u r i n g the 1 9 7 0 f s . have a l r e a d y p l e d g e d t o do s o . raise o f f i c i a l countries If it would developing t o 0.7 per c e n t o f t h e i r GNP, and the i n c r e a s e would take p l a c e g r a d u a l l y d u r i n g the decade ahead. countries nearly Many c o u n t r i e s the g o a l i s a c h i e v e d , f l o w s o f development f i n a n c e t o t h e sponsored Consequently, e x p e c t i n g a f l o w o f development r e s o u r c e s i n the 1970 f s t h a t exceeds the amounts o b t a i n e d i n the 1960 f s may have t o do more to a t t r a c t p r i v a t e capital. I f d e v e l o p i n g c o u n t r i e s do c o n c e n t r a t e more d i r e c t l y efforts to a t t r a c t p r i v a t e investment, have an e n l a r g e d o p p o r t u n i t y process. to c o n t r i b u t e The more i n f l u e n t i a l the more s u c c e s s f u l they w i l l t h e i r c e n t r a l banks will to the development they a r e w i t h t h e i r be i n s u p p o r t i n g t h i s task of a t t r a c t i n g scarce p r i v a t e c a p i t a l to the governments, effort. The developing c o u n t r i e s r e q u i r e s an investment c l i m a t e t h a t b o t h domestic and foreign investors f i n d compatible. on Here i t must be emphasized -22that i t i s necessary to create conditions conducive to i n v e s t o r s as w e l l as to owners o f f o r e i g n c a p i t a l . d e v e l o p i n g c o u n t r i e s w i l l want t h e i r stantial share o f p r i v a t e l y own c i t i z e n s financed enterprises. domestic Undoubtedly, to own a subT h i s means domestic i n v e s t o r s w i l l have t o p r o v i d e a s i z a b l e p r o p o r t i o n the r e q u i r e d to developing c o u n t r i e s a l s o r e q u i r e s capital t h a t the f i r m s and i n d u s - f i n a n c e d must be a b l e t o s u r v i v e under the p r e s s u r e international competition. of T h i s means they must n o t be o v e r l y s h e l t e r e d from the w i n d s o f c o m p e t i t i o n b e h i n d e x c e s s i v e l y tariff tries of resources. A t t r a c t i n g s c a r c e - - and e x p e n s i v e - - p r i v a t e tries that or o t h e r p r o t e c t i v e w a l l s . To the e x t e n t t h a t the indus- o f d e v e l o p i n g c o u n t r i e s a r e a b l e to e x p o r t p r o d u c t s a r e c o m p e t i t i v e i n p r i c e and q u a l i t y , high that they w i l l have a b e t t e r chance o f p e n e t r a t i n g f o r e i g n m a r k e t s . As s t r e s s e d e a r l i e r , also c a l l includes for efforts i n c r e a s i n g the f l o w o f s a v i n g s All good c l i m a t e of the economic s t a b i l i t y f o r investment, foreign trade, policies governments. that avoid capital This institutions to in the b u i l d i n g o f c a p i t a l markets - - a l l a r e through t h e i r a oversheltering t o compete and e a r n the capable own a c t i o n s and through t h e i r -- investment. that provides o f p o l i c i e s w h i c h c e n t r a l banks a r e p a r t i c u l a r l y of influencing to these - - to f i n a n c i a l that provide l i q u i d i t y i n d u s t r i e s and w h i c h make them f i t results private the c a r e f u l b u i l d i n g o f c a p i t a l m a r k e t s . as w e l l as b u i l d i n g i n s t i t u t i o n s of to a t t r a c t advice -23Concluding Observations The answers t o the s e r i e s o f q u e s t i o n s posed a t o u t s e t have been g i v e n a t s e v e r a l p o i n t s i n the However, the discussion. the c o n c l u s i o n s can be summarized b r i e f l y for greater emphasis: C e n t r a l banks i n d e v e l o p i n g c o u n t r i e s , ing with innovations t o promote economic development, n e g l e c t e d the main f u n c t i o n s banking. while In p a r t i c u l a r , experimenthave n o t traditionally associated with they have t r i e d to m a i n t a i n central domestic p r i c e s t a b i l i t y and e q u i l i b r i u m i n the b a l a n c e o f payments. many o f them have been f a i r l y s u c c e s s f u l i n p u r s u i n g t h i s tive, a number o f them have a l s o found the r e s u l t s While objec- of t h e i r efforts disappointing. C e n t r a l banks have adopted a v a r i e t y o f i n n o v a t i v e to encourage economic development. The m o b i l i z a t i o n o f s a v i n g s has been o f p r i m a r y concern. (such as l i f t i n g received a r e a l i s t i c serious inflation, satisfactory. to enhance the l i q u i d i t y o f f i n a n c i a l exchanges and the development o f o t h e r c a p i t a l market I n some c o u n t r i e s , invest- stock institutions. c e n t r a l banks were a l s o a u t h o r i z e d conduct a commercial b a n k i n g b u s i n e s s , savers sometimes ment have been f o s t e r e d - - i n c l u d i n g the o r g a n i z a t i o n o f specific taken to a s s u r e t h a t r a t e o f r e t u r n i n the f a c e o f the r e s u l t s were g e n e r a l l y Numerous arrangements domestic Where measures were low i n t e r e s t r a t e c e i l i n g s ) steps and some o f development assignments as w e l l . them were However, most o f to given these -24institutions have found such added f u n c t i o n s with their basic incompatible missions. Instead, support to be a number o f c e n t r a l banks have p r o v i d e d t o the f o r m a t i o n o f s e p a r a t e i n s t i t u t i o n s development f i n a n c e . to Some o f them s u p p l i e d c a p i t a l strong provide for agricul- t u r a l and i n d u s t r i a l development banks; o t h e r s extended c r e d i t them, p u r c h a s e d t h e i r for their obligations, securities, i n general, or h e l p e d to c r e a t e a market it appears t h a t most countries have r e c o g n i z e d the i n f l a t i o n a r y p o t e n t i a l o f heavy r e l i a n c e c e n t r a l bank funds to f i n a n c e development i n s t i t u t i o n s , few i n s t a n c e s t h i s a p p a r e n t l y was n o t the case. by c e n t r a l banks has been c o n c e n t r a t e d on measures t o i n f l u e n c e f l o w o f commerical bank c r e d i t away from t r a d i t i o n a l uses In pursuit of this o f i n s t r u m e n t s has been brought t o b e a r . have i n c l u d e d p r e f e r e n t i a l guidelines objective, (such a wide range The most p o p u l a r discount rates, d i f f e r e n t i a l on the c o m p o s i t i o n o f l o a n and c e i l i n g s on s p e c i f i c k i n d s o f c r e d i t . cate c r e d i t seem t o have been p a r t i c u l a r l y the w h o l e r e s u l t s have been r a t h e r ones reserve portfolios, A few attempts to allo- s u c c e s s f u l - - b u t on mixed. C e n t r a l banks have g e n e r a l l y been a good s o u r c e o f to t h e i r the f o r e i g n trade and domestic commerce) and toward development p r o j e c t s . requirements, on but i n a Perhaps the g r e a t e s t amount o f i n n o v a t i v e e f f o r t as t h e f i n a n c e o f to governments on problems o f economic development. advice However, -25i n some c o u n t r i e s , institutions. the a d v i s o r y r o l e has been shared w i t h S i n c e the method o f s h a r i n g v a r i e s g r e a t l y c o u n t r y to c o u n t r y , overall it is difficult from t o make a n assessment o f the results. L o o k i n g ahead t o the 1 9 7 0 f s , oping countries of o f f i c i a l However, other i t appears t h a t the d e v e l - can e x p e c t a c o n s i d e r a b l e e x p a n s i o n i n the volume r e s o u r c e s r e c e i v e d from the i n d u s t r i a l nations. i t a l s o seems e v i d e n t t h a t they w i l l have to on a t t r a c t i n g a s u b s t a n t i a l amount o f p r i v a t e c a p i t a l . concentrate Thus, they w i l l have t o c r e a t e an investment c l i m a t e t h a t b o t h domestic and foreign investors f i n d compatible. If they adopt t h i s course, c e n t r a l banks w i l l have an e x c e l l e n t o p p o r t u n i t y t o e n l a r g e c o n t r i b u t i o n t o the development process. their
@FedFRASER