Abstract
A loan is considered a purely financial transaction that alters the composition of particular portfolios while leaving the aggregate stock of assets unchanged. Because such a transaction does not of itself generate new production, its dollar value is excluded from the calculation of GNP. It is probably for this reason that the economic significance of lending programs for stabilization purposes has been largely neglected. The transfer payment is similar to the loan in that neither enters the income stream directly, yet the former is considered to have a substantial economic effect.In a development context external financing is thought to be a significant variable for increasing an economy's growth rate. The success of these loans in generating growth is usually measured by comparing the actual growth rate with some desired standard growth rate.
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