Export earnings fluctuations and economic development : an analysis of compensatory financing schemes

THE STUDY FOCUSES ON COMPENSATORY FINANCING SCHEMES (CFS) DESIGNED TO STABILIZE EXPORT EARNINGS RATHER THAN ON COMMODITY AGREEMENTS USUALLY DESIGNED TO INFLUENCE PRICES. ACTUAL OPERATING ARRANGEMENTS AND INSTITUTIONALIZATION ISSUES ALSO WERE INVESTIGATED. CONCLUSIONS WERE THAT FOR A CFS, THE ACTUAL MEASUREMENT OF EXPORT EARNING FLUCTUATIONS IS ACCOMPLISHED BEST WITH A MOVING AVERAGE OF YEARS IMMEDIATELY ADJACENT TO THE YEAR OF CONCERN. EMPIRICAL ESTIMATES OF A CFS"S COSTS AND BENEFITS DURING THE 1960"S AND EARLY 1970"S SHOWED THE COSTS TO BE MANAGEABLE AND THE BENEFITS TO BE DISTRIBUTED FAIRLY EVENLY, WITH THE POOREST COUNTRIES ACCOUNTING FOR SIGNIFICANT SHARES. FOR POSSIBLE METHODS OF INSTITUTIONALIZING A CFS, SIMULATIONS WERE MADE FOR A LIBERALIZED IMF FACILITY, AND ITS BENEFITS WERE SIMILAR TO THOSE OF OECD SCHEMES. THE EXTENT TO WHICH A CFS CAN HELP DEVELOPING COUNTRIES WITH EXPORT EARNING INSTABILITY WILL DEPEND ON HOW FUNDS ARE USED BY BENEFICIENT GOVERNMENTS.