Long-term policies to cure balance of payment deficits, Managerial Economics

Long-Term Policies

One long term option of tackling balance of payments deficit is export promotion.  In the long run this is the best method of improving a balance of payments.  If the general level of efficiency in an economy can be raised, then exports will benefit.  Efficiency can be promoted by mergers in exporting firms (thereby reaping economies of scale), research and economic growth - for it is felt that once an economy is growing it is generating the necessary dynamism and technological improvement that will feed through into a better export performance.

A second long-term option is Import Substitution.  The replacement of imports by home products can be achieved by economic planning.  If the defects of home products can be analysed, and the likely future trends in demand can be forecast, then domestic firms can take the necessary action both to improve their product and to expand their capacity.  Government support for certain industries can also be helpful here.

Posted Date: 11/30/2012 5:24:22 AM | Location : United States







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