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The
aim of the study is to analyse the balance of payments performance
of the Sri Lankan economy with a view to identifying the
major factors which account for this performance. Arguments
are developed and propositions explored at various levels
of generality. Explanations of phenomena at lower levels
of generality are intended to reinforce and enrich the picture
painted ate higher levels. The time period chosen for the
study is the post 1978 period. A longer time-span would
have perhaps permitted a better appreciation of the influence
of structural factors, but data limitations and other considerations
precluded such a broadening of the time horizon. Given the
exploratory nature of the study, considerable use is made
of graphs and simple statistical indicators. Since many,
if not most, of the time series data which the study makes
use of are strongly trended (upwards), rates of change transformations
have been applied. The problem with the use of trended variables,
is that they tend to be highly correlated with each other
“with the obvious danger that such correlations will
be at least partly spurious” (see Thomas 1985:6).
The fundamental conclusion of the study
is that developments in Sri Lanka’s external payments
situation over the short-term can be seen as fundamentally
an outcome of developments in the external environment.
At a policy level, and in somewhat general terms, this means
that effective economic management needs to take cognizance
of the latter. Failure to do so could lead to serious miscalculations
in planning and policy formulations.
Table of Contents:
- Introduction
- The Overall Balance
- The Current Account Balance
- The Trade Balance
- Services and Transfers
- The Capital Account
- Financing of the Deficit
- Conclusions and Policy Implications
- References
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