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Trade and Development Report 2004

Policy Coherence, Development Strategies and Integration into the World Economy

image of Trade and Development Report 2004

The current edition of the Trade and Development Report focuses on the global economic recovery currently underway. The Report raises questions about its considerable downside risks stemming from oil prices and exchange rates and the fact that both the sources and incidence of growth are unequally distributed around the globe. The TDR 2004 argues that, to enable developing countries to establish a virtuous interaction between external financing, domestic investment and export growth, a feasible development agenda has to be based on the concept of coherence. UNCTAD warns that attempts by many countries to keep their currencies undervalued could end up in competitive devaluations that could be disastrous for the world economy. UNCTAD suggests that changes in the exchange rate that imply deviation from purchasing-power parity should be governed by multilateral regulations.

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Conclusions and policy challenges

Rapid integration into the world economy, followed by many developing countries as a key element of their economic reform agenda since the mid-1980s, has not had the expected developmental effects. Their increased exposure to international market forces and competition has not enabled these countries to establish the kind of virtuous interaction between international finance, domestic capital formation and export activities that underpinned the successful catching up of Western Europe after the Second World War and of the NIEs during the 1980s and early 1990s. In this context, a fundamental question is how to reinforce coherence between national development strategies and global processes and disciplines, as well as policy coherence among and within the various aspects/sectors of the global economy that impact on development prospects of developing countries. Of particular importance is the interface between the international trading system and the international monetary and financial system.

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