Market-orientated strategies to promote development

Trade Liberalisation

1. Expansion of consumption possibilities (less protectionist barriers, more trade)

2. Dynamic gains from trade

3. Increased consumer welfare

4. Increase export sales (export-led growth)

Promotion of FDI

1. Increase in investment (increase AD and LRAS, positive multiplier)

2. Increase supply of loanable funds

3. Increases supply of capital

4. Transfer of knowledge and production techniques which increases productivity

Removal of government subsidies

1. Increases level of competition (high product quality, lower prices)

2. Allows government to spend tax revenue elsewhere (education, healthcare)

Free floating exchange regime

1. Allows free capital mobility (increases supply of loanable funds)

2. If unable to maintain their peg in a managed exchange rate, it increases investor confidence

Microfinance schemes

1. Helps overcome the savings gap (more people have access to finance, increases GDP)

2. Reduces the number of people living in poverty