I. Introduction

Jeffrey Davis
Published Date:
January 1992
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Countries undertaking adjustment programs usually suffer from a broad range of economic problems. These may include:

  • external imbalances that are reflected in current account deficits, capital flight, and high levels of external indebtedness;

  • accelerating inflation often accompanied by falling private investment and stagnant (or even negative) growth; and

  • growing reliance on rationing and controls (for credit, imports, prices, etc.) with consequent reductions in capacity utilization and increases in structural maladjustments and underlying imbalances.

In this context Fund–supported adjustment programs seek to restore economic growth, while bringing about a balance of payments position that is sustainable in the medium term. Achievement of these objectives requires coordinated use of a variety of policy measures. These include:

  • demand management policies, particularly monetary and fiscal measures;

  • exchange rate policies;

  • external debt management policies; and

  • structural policies affecting capacity utilization and productive potential.

This volume, which has been used in selected IMF Institute courses, provides an introductory review of some of the policy issues in each of these areas. In particular, successive chapters review issues relating to monetary, fiscal, exchange rate, trade, external debt, and supply–oriented policies.

Emphasis in each chapter is on issues that may arise in adjustment programs. Importance has been attached to making the papers accessible to the non–technical reader. To this end the papers emphasize intuitive, rather than rigorous, arguments and make substantial use of country examples.

The papers were prepared, in the latter part of 1990, by an IMF Institute team headed by Jeffrey M. Davis. Individual authorship is recorded for each of the chapters; papers, however, draw extensively from other Fund and Institute documents. In some cases papers have been updated by staff members other than the original authors. Jeanine Moeis was responsible for editing, design, and production. The opinions expressed in the papers, as well as any errors, are the responsibility of the authors and do not necessarily represent the views of the Fund.

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