LETTERS

Multi-market modelling I am writing in reference to the article First, for a profitable company, equity of monopolies, especially ones estab- "Computer Models for Agricultural Policy capital is more expensive to issue than lished and run according to political patro- Analysis," by Avishay Braverman and debt. For a developing nation it is an nage, and foreign exchange restrictions. Jeffrey Hammer, in Finance and Develop- expensive way to finance development. Third, transition arrangements are fine ment, June 1988. The article has stimu- The government may have the intention to reduce the volatility of foreign flows, but lated strong interest among faculty mem- to limit this cost in various ways, but foreign they also reduce the size of flows. The bers in the department. The interest investors are not naive and such limita- foreigners must believe that they are really extends to the possibility of the Model's tions, if practiced, will undermine the inflow transitional (as they have been in Japan) application to . It would be very and increase its volatility. The authors cite and not a permanent restriction of the useful to have access to the methodology Korean convertibles as cheap money; this market. The best way to ensure that the developed. V\te would appreciate your is a gross error, unless they believe the transition arrangements are not perma- assistance and cooperation in this regard. foreign investor is misguided. (Incidentally, nent is for the government to encourage Murither Share they fail to mention an important benefit; local investors, pension funds, and insur- Yarmouk University equity finance in place of dollar debt shifts ance companies to invest in the local Irbid, Jordan the exchange risk on to the foreign equity market and support its develop- investor.) ment. Mr. Braverman responds: Second, there exist additional hidden Lastly, stock markets were originally A large number of readers have contacted "costs" (benefits in my view) which would markets in debentures. Common stock us with requests for more information on require: corporations to raise their account- became a feature in the 1920s. Would not our work. We are grateful for your interest ing standards and be more publicly account- debenture markets be worth encouraging, in our article. For further information and able; capital to be distributed in part particularly as a way of introducing greater documentation on applications of the according to the perception of investors, freedom into the credit process? technique described in our article contact: mainly institutions, largely independently K.J.T. Pakenham Jeff Hammer, Senior Economist, Agricultural of the government; and greater market John Govett & Co. Limited, UK Policies Division, Agricultural and Rural Devel- liberalization, in particular the curtailment opment Department, Wforld Bank, 701 18th Street NW, Washington DC 20433 USA A large part of our activities in the coming year entails workshops and presentations designed to help people use these models in their own countries. We are planning a number of similar seminars involving the multi-market ap- proach as well as other issues of agricul- tural policy to be presented in various places around the world. In addition, a manual on the construction of this type of Statement of Ownership, Management, and Circulation required by 39 USC 3685. model is in preparation and will be 1a. Title: Finance & Development. 1b. Publication No. 123-250. 2. Date of filing: 10/16/88. 3. Frequency: Quarterly available later this year. 4. Complete mailing address of known office of publication: Finance & Development, International Monetary Fund, Washington, D.C. 20431. 5. Complete mailing address of the headquarters of general business offices of the Publisher: International Monetary Fund and the International Bank for Reconstruction and Development, Washington, DC 20431. 6. Full names and complete mailing address of Publisher, Editor and Managing Editor: Publisher: International Monetary Fund and International Bank for Reconstruction and Development, Washington, DC 20431; Editor: Bahram Nowzad, same address; Managing Editor: Shuja Nawaz, same address. 7. Owner: International Monetary Fund and the International Bank for Reconstruction and Development, Wash- ington, DC 20431. 8. Known bondholders, nnortgagses, and other security holders owning or holding 1 percentofmoreofthetotalamountof bonds, mortgages or other securities: None. 10. Extent and Average No. of copies each Actual No. of copies of single issue Costs of developing equity markets nature of circulation issue in preceding 12 months published nearest to filing date A. Total No. of copies 58,400 60,300 The article on "Emerging Stock Markets B. Paid and/or requested circulation in Developing Countries," by David Gill C. Total paid and/or requested circulation 45,911 43,957 and Peter Trapper (Finance & Develop- D. Free distribution by mail, carrier or other means ment, December, 1988) contains some Samples, complimentary and damaging myths. For any government other free copies 10,400 11,130 E. Total distribution (sum of C and D) 56,311 55,087 considering developing a stock market as F. Copies not distributed 2,089 5,223 an aid to the development process and G. Total (sum of E and F) 58,400 60,300 not just a new call on foreign money, the I certify that the statements made by me above are correct and complete. following points must be emphasized. Shuja Nawaz, Managing Editor

Finance & Development I March 1989 53

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