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Policy Signals and Market ResponsesCrisis: Decline and Denial (1975–1981)

Policy Signals and Market Responses: Crisis: Decline and Denial (1975–1981) [In June 1976, the Government of the Republic of Zambia’s (GRZ) was forced to hastily negotiate an emergency standby agreement (balance-of-payments loan) with the International Monetary Fund (IMF) to avoid defaulting on payments for critical imported goods, including food. Earlier analyses of this apparent sudden financial crisis have focused on the deterministic impacts of falling copper prices on the country’s access to foreign exchange in 1974 and the cost of regional wars after the closure of its border with Rhodesia in 1973. For example, economic historian Morten Jerven has claimed that Zambia’s exposure to copper price volatility explains the country’s regional underperformance, and historian of Zambia Miles Larmer has attributed the GRZ’s reliance on foreign borrowing to both falling copper prices and disrupted regional trade.1 However, as du Plessis and du Plessis have argued, these more deterministic explanations should not have doomed the economy to failure, but rather: resource abundance might [have] be[en] translated into sustained growth and development if the extractions [we]re mediated through good institutions.2] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

Policy Signals and Market ResponsesCrisis: Decline and Denial (1975–1981)

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References (12)

Publisher
Palgrave Macmillan UK
Copyright
© The Editor(s) (if applicable) and The Author(s) 2016
ISBN
978-1-349-56902-1
Pages
91 –116
DOI
10.1057/9781137390981_5
Publisher site
See Chapter on Publisher Site

Abstract

[In June 1976, the Government of the Republic of Zambia’s (GRZ) was forced to hastily negotiate an emergency standby agreement (balance-of-payments loan) with the International Monetary Fund (IMF) to avoid defaulting on payments for critical imported goods, including food. Earlier analyses of this apparent sudden financial crisis have focused on the deterministic impacts of falling copper prices on the country’s access to foreign exchange in 1974 and the cost of regional wars after the closure of its border with Rhodesia in 1973. For example, economic historian Morten Jerven has claimed that Zambia’s exposure to copper price volatility explains the country’s regional underperformance, and historian of Zambia Miles Larmer has attributed the GRZ’s reliance on foreign borrowing to both falling copper prices and disrupted regional trade.1 However, as du Plessis and du Plessis have argued, these more deterministic explanations should not have doomed the economy to failure, but rather: resource abundance might [have] be[en] translated into sustained growth and development if the extractions [we]re mediated through good institutions.2]

Published: Dec 21, 2015

Keywords: International Monetary Fund; Foreign Exchange; Central Committee; Market Response; Policy Signal

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