Book Review: “Foreign Exchange Constraint and Developing Economies”

Developing economies are seeking to sustainably grow and improve the standard of living of their populations by utilising domestic and foreign resources in their production and consumption functions. Foreign exchange is at the centre of this process and flows as the lifeblood of small, open economies. The history of development within Latin America and Caribbean (LAC) is inextricably linked to globalisation with ubiquitous migration and transnational resource sharing. Foreign exchange acts as the transmission mechanism for resource sharing, and its relative scarcity or inefficient usage can be detrimental to the development of these economies.

Access to foreign resources exposes countries to the events that affect the price of those resources – such as oil, wheat, and many other commodities as well as factors of production. External shocks emanating from engagement in foreign trade pass through to the domestic market, whereby foreign problems become domestic problems. In fact, the two largest crises that negatively impacted GDP growth for LAC in the past 60 years occurred in 2009 (from the onslaught of the Global Financial Crisis - GFC) and 2020 (the COVID-19 pandemic), both caused by external shocks from global events.[1] The book “Foreign Exchange Constraint and Developing Economies”, edited by Aleksandr V. Gevorkyan, examines the usage of foreign exchange across emerging markets and explores issues surrounding capital structure, sustainable economic development, foreign exchange reserves, exchange rates, and crises stemming from external vulnerabilities.

The text is sectioned into eleven chapters, structurally encompassed by three main parts: 1) international capital markets; 2) currency valuations and exchange rate dynamics and 3) pandemic-induced international economy trends which are examined through the lens of a complex mix of developing economies’ realities.

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[1]GDP Data selected from World Bank (https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=ZJ).