III. Financing the Deficit

a) Fill each gap with a suitable word from the box.

b) Sum up the text in 5-7 sentences and present your summary in class.

repaid	reliance	reduced	limit	inflation	spendings
occur	adversely	bank	budget	leads	supply

132 PART II. FINANCE

Since the early 1970s quite a number of countries have been experiencing serious
financial problems which have caused growing (1)_____ deficits.

Trying to find solutions to swollen budget deficits, governments undertake austerity programmes (програма жорсткої економії), work out harsh (жорсткий) budgets,

implement macroeconomic stabilization, establish priorities for government (2) ___________,

analyse effects of different ways of financing their budget deficits.

In principle, budget deficits may be (3) ______ by borrowing from domestic bank and

non-bank sources, and from the rest of the world. Excessive (4) _________ on any of these

methods of finance may be dangerous because:

• Government borrowing from the central (5)_______ directly affects the monetary base

and the money (6)____. Excessive growth in the money supply leads to high (7)_______

rates and balance-of-payments problems.

• Substantial borrowing from the non-bank sector may (8)_______ affect the structure of

demand and growth potential. In particular, this borrowing may (9) ___________ the

availability of resources to finance private investment. Such 'crowding out' of private
investment (витіснення приватних інвестицій державними витратами) may
(10)___ through the impact of government borrowing on domestic interest rates.

• Reliance on external finance (11)_____ to the accumulation of debt, which needs to be

serviced and eventually (12)____.

A prudent fiscal policy permits a public deficit, but it must be maintained at a level consistent with other macroeconomic objectives: controlling inflation, promoting private investment, and maintaining external creditworthiness.

IV a) Supply the articles where necessary.

b) Write down 3-5 questions about the text.

c) Name the problems of emerging markets mentioned in the text and say which of them are typical of Ukraine.

In 1990 the fastest rising stock markets in _______ world were those emerging in the

developing countries. There are now more than 5 stock exchanges in __________ developing

world: some are insignificant or dormant, others are active and growing.

It was once widely presumed that poor demand for security would be the biggest

handicap to____ emergence of stock markets in the developing world. There were not

enough potential buyers in developing countries. However, it is now evident that there is

generally ____ adequate demand for securities, in both the primary and secondary

markets, arising both from speculative interest and from______ portfolio needs of financial

institutions.

Even if the emerging stock markets have some demand-side difficulties,_________ more

general, continuing and severe problem has been_____ insufficient supply of securities. The

chief markets problem in developing countries is that the secondary market for bonds an

shares is often inactive. There are often not enough buyers and seller to make_______ steady

market. Quite often institutional stockholders hold securities firmly matched against their

future liabilities rather than engaging in frequent trade. When institutions do enter__________

secondary market they may try to buy or sell in large lots, thus making a big price
disturbance. As institutions amass large blocks of shares they may be tempted to exercise
their market power, especially in_____ field of corporate takeovers.

Speculation has been common in most of the emerging stock markets and very

noticeable because of____ thinness of the markets. While the opportunity for speculation

is one of the chief attractions of any stock market, the line between speculation and sharp practices if something hard to draw.

Priviliged placements, insider trading, short selling and other questionable practices have occurred throughout the developing world.

In these circumstances. _____ pure theory of international trade suggests that stock

markets would not be viable in all countries but would cluster at a few points of______ globe,

determined by the location of factor skills and time zones.

Дата добавления: 2014-12-23