Table Of ContentINTERNATIONAL DEBT AND CENTRAL
BANKING IN THE 1980s
STUDIES IN BANKING AND INTERNATIONAL FINANCE
Published by Macmillan in association with the Centre for Banking and
International Finance, The City University, London
General Editor: Geoffrey E. Wood
Roy A. Batchelor and Geoffrey E. Wood (editors)
EXCHANGE RATE POLICY
Forrest Capie and Geoffrey E. Wood (editors)
FINANCIAL CRISES AND THE WORLD BANKING SYSTEM
Brian Griffiths and Geoffrey E. Wood (editors)
MONETARY TARGETS
MONETARISM IN THE UNITED KINGDOM
Donald R. Hodgman and Geoffrey E. Wood (editors)
MONETARY AND EXCHANGE RATE POLICY
Zannis Res and Sima Motamen (editors)
INTERNATIONAL DEBT AND CENTRAL BANKING IN THE 1980s
Series Standing Order
If you would like to receive future titles in this series as they are
published, you can make use of our standing order facility. To
place a standing order please contact your bookseller or, in case of
difficulty, write to us at the address below with your name and
address and the name of the series. Please state with which title you
wish to begin your standing order. (If you live outside the UK we
may not have the rights for your area, in which case we will forward
your order to the publisher concerned.)
Standing Order Service, Macmillan Distribution Ltd,
Houndmills, Basingstoke, Hampshire, RG21 2XS, England.
International Debt and
Central Banking in
the 1980s
Edited by
Zannis Res and Sima Motamen
M
in association with the
Palgrave Macmillan
MACMILLAN
PRESS
0 Zannis Res and Sima Motamen 1987
Softcover reprint of the hardcover 1st edition 1960
All rights reserved. No reproduction, copy or transmission
of this publication may be made without written permission.
No paragraph of this publication may be reproduced, copied
or transmitted save with written permission or in accordance
with the provisions of the Copyright Act 1956 (as amended),
or under the terms of any licence permitting limited copying
issued by the Copyright Licensing Agency, 7 Ridgmount Street,
London WClE 7AE.
Any person who does any unauthorised act in relation to
this publication may be liable to criminal prosecution and
civil claims for damages.
First published 1987
Published by
THE MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 2XS
and London
Companies and representatives
throughout the world
British Library Cataloguing in Publication Data
International debt and central banking in
the 1980s. - (Studies in banking and
international finance)
1. Debts, External 2. Banks and
banking, Central
I. Res, Zannis 11. Series
336.3'6 HJ8015
ISBN 978-1-349-08331-2 ISBN 978-1-349-08329-9( eBook)
DO1 10.1007/978-1-349-08329-9
Contents
Foreword vii
Notes on the Contributors viii
1 Introduction
Zannis Res and Sirna Motarnen
PART I THE 1983 CONFERENCE
2 Notes on the Problem of International Debt
Allan H. Meltzer
3 A Central Banker's View about the International Debt
Crisis 31
Brian Quinn
4 The Lessons of the Crisis: a Developing Country View 41
Carlos Geraldo Langoni
5 The International Debt Crisis - A Growth-oriented
Management Approach 57
Paulo Pereira Lira
6 The International Debt Threat: a Way to Avoid a
Crash
Minos Zornbanakis
PART I1 THE 1984 CONFERENCE
7 Properties of Monetary Systems
Allan H. Meltzer
Comment on 'Properties of Monetary Systems' 105
Geoffrey E. Wood
vi Contents
8 The Costs and Benefits of International Banking
Shelagh A. Heffernan
Comment on 'The Costs and Benefits of International
Banking'
D. Fitzgerald
Reply to Comments by D. Fitzgerald
Shelagh A. Heffernan
9 International Lenders of Last Resort: Are Changes
Required?
Stephany Griffith-Jones and Michael Lipton
Comment on 'International Lenders of Last Resort:
Are Changes Required?'
K. Phylaktis
10 The Theory of Last Resort Lending
Michael Beenstock
Comment on 'The Theory of Last Resort Lending'
Lionel D. Price
11 Country Risk: A Model for Predicting Debt Servicing
Problems in Developing Countries
R. J. Taffler and B. Abassi
Comment on 'Country Risk: A Model for Predicting
Debt Servicing Problems in Developing Countries'
Roy Batchelor
Index
Foreword
In the late 1970s and early 1980s, the world became increasingly
aware of the mounting problems of international debt, and the ability
of the debtor countries to repay.
This book is concerned with the international debt crisis and its
solutions, particularly the role of Central Banks. The collection of
papers, presented in two consecutive conferences, includes the views
of central bankers, Euromarket leaders and economists spread
around the globe from Europe to South America. Conflicts of
interest between North and South are clearly identified and various
authots propose policies which attempt to resolve such conflicts.
There is no unanimity of views, only a genuine endeavour to avoid
the collapse of the international financial system and learn from the
mistakes of the past.
Part I of the book has a sense of urgency focusing on how central
bankers can avert a financial crash. Part I1 is more reflective,
analytical and with a longer view in questioning the merits of
monetary systems and central banking; contrast A. Meltzer's contri-
bution in each part, Langoni's concern about debt repayments and
Beenstock's views on last resort lending. Such multiplicity of views
presented in this volume will, we hope, contribute to a deeper under-
standing of the problems of international debt and the corresponding
solutions.
Phyllis Brand, Debbie Gill and Pat Baker provided valuable
secretarial assistance in organising the conference and preparing the
manuscript.
ZANNISR ES
SIMAM OTAMEN
Notes on the Contributors
B. Abassi is the Director of Planning and Projects at the National
Enterprise for Production of Passenger Cars in Algeria. He was
previously the Director of Planning at the Ministry of Heavy
Industry.
Roy Batchelor is Director of Research, Centre for Banking and
International Finance, The City University Business School.
Professor Michael Beenstock is EsmCe Fairbairn Professor of Finance
and Investment, The City University Business School.
Professor D. Fitzgerald is Visiting Professor, The City University
Business School.
Dr Stephany Griffiths-Jones is Lecturer in the Institute of Develop-
ment Studies, University of Sussex.
Dr Shelagh A. Heffernan is Lecturer in Economics, The City Univer-
sity Business School.
Professor Carlos Geraldo Langoni was formerly Governor of the
Central Bank of Brazil.
Michael Lipton is a Professorial Fellow at the Institute of Develop-
ment Studies, University of Sussex.
Professor Paulo Pereira Lira was formerly Governor of the Central
Bank of Brazil.
Professor Allan H. Meltzer teaches at Carnegie-Mellon University,
Pittsburgh, USA.
K. Phylaktis is Director of Undergraduate Studies, Centre for
Banking and International Finance, The City University Business
School.
Lionel D. Price is Adviser, International Division, Bank of England.
Brian Quinn is Assistant Director, Bank of England.
Zannis Res is Director, Centre for Banking and International
Finance, The City University Business School.
Dr R. J. Tamer is Dearden Farrow Professor of Accounting and
Financial Analysis, The City University Business School.
Professor Geoffrey E. Wood teaches at the Centre for Banking and
International Finance, The City University Business School.
Minos Zombanakis is Chairman, CIGNA International Holdings.
1 Introduction
Zannis Res and Sima Motamen
This volume collects the proceedings of two conferences held at The
City University, in October 1983 and May 1984. Both conferences
were concerned with international debt problems. The first confer-
ence examined the current problems, and solutions proposed for
them, while the second was more analytical, examining the workings
of the international monetary system and reflecting on how
difficulties could be avoided in the future. This introduction summar-
ises the main points of the chapters and sets out some general
conclusions.
THE 1983 CONFERENCE
The 1983 conference was opened by Allan Meltzer, who disputed
the view that the oil price increases of the 1970s were the main
source of the debt problems of developing countries. He points out
that while the oil price shock of the 1970s might have had something
to do with the international debt crisis of the late 1970s and early
1980s, it would be misleading to regard the oil price shock as the
sole source of the debt problem. He contrasts effects on countries
such as Brazil, an oil importer, and Mexico, an oil exporter. Mexico
was anticipating a rise in oil prices, perhaps to $80-$100 per barrel,
and on that basis devoted a large share of its borrowed capital to
investment in oil projects. Consequently, when the oil price fell,
Mexico found itself unable to pay its debts. On the other hand,
Brazil, which was an oil importer, undertook wasteful investments
in nuclear power.
Meltzer highlights the structural differences in the debt problems
of various developing countries and points out the drawbacks of the
IMF's proposed economic strategies for Latin American countries
such as Mexico, Argentina and Brazil. These strategies, which advo-
cate a reduction of imports by each country, ignored the strong trade
links between the Latin American countries, and hence ultimately
Z. Res et al. (eds.), International Debt and Central Banking in the 1980s
© Zannis Res and Sima Motamen 1987
