Question

20. Please describe the balance payment crisis and capital. Why are cries in developing countries self-fulfilling?

Answer 1

Balance of payments crisis is a situation where the country is unable to pay for its imports due to more imports than exports. it has 2 parts 1 the current account and the capital account. Where current account is general trade and foreign currency remittance,and capital account is foreign investments in the country capital markets

Mostly crisis in developing countries are self fulfilling because here expectations play a major role it does not happen because of unhealthy economic condition but on the expectations that it would become unhealthy and which will ultimately cause financial Crisis as pessimistic expectation on developing countries is more when compared with developed countries crisis in developing countries are self fulfilling.