Price Stability, BoP Eqiulibrium and Economic Growth

and Economic Growth V B Angadi Monetary and Financial Policies in Developing Countries: Growth and Stabilisation by Akhtar Hussain and Anis Choudhary; Routledge Studies in Development Economics, London, 1996; pp 230, $ 40, THE book under review addresses the monetary and financial policies issues which have generated one of the most passionate debate in macro-economics. The relevance of the issues raised in the book is beyond doubt in the present context of the most of the developing economies which are experiencing transition. The discussion on the policy issues contained in the book is quite stimulating and thought- provoking. The important questions which have been examined at length in the book include: (1) Should monetary policy aim at minimising cyclical fluctuations, i e, minimising deviation of actual output from the potential one? In other words, should it be used for maintaining stability of price level and other monetary variables like exchange rate and interest rate rather than promoting growth of output? (2) What role do money and financial policies play in promoting long run growth of an economy with reasonable price stability? Are growth and stability objectives conflicting or complementary to each other? (3) Is it possible to attain sustained growth rate of output without monetary stability through repressed financial sector and forced saving via inflation? (4) What are the distinct features of money supply process and money demand behaviour in the developing economies? (5) Is it the demand shock or supply shock, that is the prominent cause of price instability in the developing economies? (6) Are price stability, external balance and growth interrelated? (7) What are the prerequisites of success of financial sector reforms? (8) What are institutional arrangements apart from the appropriate package of policies necessary for ensuring macro-economic stability?