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F&D logo
A quarterly magazine of the IMF
  June 2001
Volume 38, Number 2
International Capital Flows

Private Capital Flows and Growth
Deepak Mishra, Ashoka Mody, and Antu Panini Murshid
International capital flows have increased dramatically in recent years, but their impact on developing countries has not been clear. Whereas capital flows have been associated with higher growth in some countries, they have also been associated with a higher incidence of crises. Do the benefits justify the costs?

How Beneficial Is Foreign Direct Investment for Developing Countries?
Prakash Loungani and Assaf Razin
The resilience of foreign direct investment during financial crises may lead many developing countries to reard it as the private capital inflow of choice. Although there is substantial evidence that investment benefits host countries, they should assess its potential impact carefully and realistically.

FDI and Corporate Tax Revenue: Tax Harmonization or Competition?
Reint Gropp and Kristina Kostial
OECD countries with high corporate tax rates have experienced both high net outflows of foreign direct investment and a decline in corporate tax revenue. Identification of a causal link between these two trends has implications for the debate on tax harmonization versus tax competition.

Exchange Rates

Exchange Rate Regimes: Is the Bipolar View Correct?
Stanley Fischer
During the past decade, many countries have changed their exchange rate regimes, moving from crisis-prone soft pegs to hard pegs or floating regimes. This trend is likely to continue, particularly among emerging market countries.

Transition Economies

Competition and Business Entry in Russia
Harry G. Broadman
Despite privatization, robust competition is still lacking in much of Russia's industrial sector, stifled by excessive concentration, vertical integration, and geographic segmentation. Many established firms enjoy protection from new (and potential) rivals. Reforming anticompetitive business structures and lowering barriers to entry are key to Russia's post-privatization reform program.

Transition Countries' Choice of Exchange Rate Regime in the Run-Up to EMU Membership
György Szapáry
An important decision for the Central and Eastern European countries seeking membership in the European Union is choosing the most appropriate exchange rate regime. Experience has shown that many considerations are involved in this decision and that there is no "one-size-fits-all" solution.

Latvia on the Way to the European Union
Roberts Zile and Inna Steinbuka
Having met most of the criteria for membership in the European Union, Latvia is addressing a few remaining challenges. These include closing the income gap and achieving structural, fiscal, and monetary convergence.

Other Topics

Integration, Interdependence, and Globalization
Paul Streeten
Although many commentators say we are living in a time of unprecedented global integration, the world economy was actually more integrated at the end of the nineteenth century. Despite increasing integration in some respects, today's world is in many ways fragmented and without coordination.

Who Has a New Economy?
Paula De Masi, Marcello Estevão, and Laura Kodres
In the second half of the 1990s, the United States enjoyed strong economic growth combined with low inflation and increased labor productivity, leading many observers to proclaim the birth of a "new economy" linked to advances in information and communications technologies.

Poverty Reduction in Developing Countries: The Role of Private Enterprise
Guy Pfeffermann
The role of private enterprise in development has been neglected by scholars, governments, and aid organizations. This is regrettable: a vibrant private sector generates jobs, raises incomes, and makes better, cheaper goods and services available.

Macroeconomic Policies and Poverty Reduction: Some Cross-Country Evidence
Paul Cashin, Paolo Mauro, and Ratna Sahay
What is currently known about how countries' choices of macroeconomic policies affect their incidences of poverty, and what are the most promising directions for further investigation of this important relationship?

IMF Financing and Moral Hazard
Timothy Lane and Steven Phillips
Although it has been argued that IMF financing may create moral hazard, it is not easy to find clear evidence of such an effect. If the extent of IMF-induced moral hazard were known, any costs would have to be weighed against the possible benefits of IMF financing.


From the Editor

Financial Focus

Crisis Resolution and Private Sector Adaptation
Gabrielle Lipworth and Jens Nystedt

Point of View

Can the World Economy Afford U.S. Tax Cuts? The International Dollar Standard Redux
Ronald McKinnon


Book Reviews

Financial Crises in Emerging Markets: An Essay on Financial Globalisation and Fragility by Alexandre Lamfalussy—Vivek Arora

From Subsistence to Exchange and Other Essays by Peter Bauer—Lynn Aylward

Maestro: Greenspan's Fed and the American Boom by Bob Woodward, and Greenspan: The Man Behind Money by Justin Martin—Prakash Loungani

Il Fondo monetario internazionale by Giuseppe Schlitzer