I.

The Country's Balance of Payments Position

A.

If the country faced an overall deficit, how was it financed? (Sale of reserves, borrowing from the IMF, rescheduling of debt, etc.) If it ran an overall surplus, did it acquire more reserves or pay back IMF loans?

B.

What was the current account balance as a share of GDP?

C.

If the country faced a current account deficit, was it offset by a private capital inflow, or was official intervention necessary? Were private capital flows primarily in the form of foreign direct investment (more difficult to reverse) or portfolio/other investment? If it ran a current account surplus, what kind of foreign assets did it acquire?

D.

Over years that the country ran a larger current account deficit, shown as a percentage of GDP, how did that allow spending shares on consumption, investment, or government purchases to increase?  If CA/GDP became more negative (fell from -1% to -3%, say), is that primarily the result of greater domestic investment [capital formation/GDP] or a decline in total domestic saving [public plus private saving, or (T-G+S)/GDP]?  

E.

Over years that the country ran a larger current account surplus (or smaller deficit), show what items decreased as a share of GDP (C, I, or G) to allow it to acquire more foreign assets.

F.

Were there signs of capital flight and a lack of confidence in the country's future prospects? (Consider financial account entries plus errors and omissions)

G.

If the country depended upon a few primary export products, was there considerable volatility in its trade balance, due to shifts in export prices and earnings?

II.

The country's economic growth and standard of living.

A.

What was the growth in real income and real income per capita? For a primary product producer, is this performance related to its terms of trade (Px/Pm)?

B.

Did strong growth result from export promotion, as suggested by a rising X/GDP ratio?

C.

If the economy grew rapidly, did that cause imports to increase and/or attract a capital inflow?

D.

Did balance of payments problems appear to force the country into a position of economic stagnation?

E.

What changes in real wages have occurred? What changes in real consumption have occurred?

III.

What macroeconomic policies contributed to this performance? Especially, how did these policies affect saving, investment, taxes, and government spending? Was policy intended to offset domestic or foreign pressures?

A.

Fiscal policy: Did government budget deficits grow as a share of GDP when economic output was below average? Was that a result of rising government expenditures, an inability to collect tax revenues, or falling GDP?

B.

Monetary policy: Were real interest rates positive and/or rising when economic output was above average? In countries where the interest rate does not represent a market-determined price, when was there rapid growth in the money supply – years of above-average output and years of balance of payments surpluses?  

C.

Were monetary and fiscal policy largely independent of each other, or did a large increase in the budget deficit cause a large increase in the money supply?

IV.

The country's foreign exchange regime.

A.

Was the currency pegged to some other currency? If so, did this limit the independence of the monetary policy choices you considered above? For example, could its interest rate differ much from rates in other countries? If the country relied upon income adjustments to alter its demand for foreign exchange, how costly was this policy as determined by its marginal propensity to import?

B.

Did the currency become overvalued, as measured by purchasing power parity? (i.e. If you compare the change in that country's producers' prices to the change in the United States, is the difference offset by a change in the value of its currency? If you are looking at a country within the European Monetary System, compare to Germany; within the French franc zone in Africa, compare to France.)

C.

Did you observe periods when the value of the exchange rate changed substantially? Is this country likely to face elastic demand for its exports and imports, which will give a larger output response to the exchange rate change?  If the country did experience a large depreciation, did it retain much competitive advantage from the depreciation, or did its subsequently higher inflation rate offset that advantage? 

V.

The country's debt position and vulnerability to financial crises

A.

Has the country fallen into payment arrears?

B.

Are periods of financial crisis linked to years of rising debt service payments relative to exports, a rising ratio of short-term debt to total debt, and a reduction in the maturity structure of its borrowing? 

C.

How do the country's ratios of debt to exports of goods and services (Debt/XGS) or debt service relative to exports of goods and services compare to standards applied elsewhere? (e.g. a World Bank goal in reducing the debt burden of highly-indebted poor countries , the HIPC Initiative, was a value for debt/XGS no greater than 150%, debt service to exports of 10%.)

VI.

Other events and influences of note - what role was played by wars, natural disasters, elections, political instability, etc.