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Debt Intolerance

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Author Info
Carmen M. Reinhart (International Monetary Fund)
Kenneth S. Rogoff (International Monetary Fund)
Miguel A. Savastano (International Monetary Fund)

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Abstract

This paper introduces the concept of "debt intolerance," which manifests itself in the extreme duress many emerging market economies experience at levels of indebtedness that would seem manageable by advanced country standards. The paper argues that "safe" external debt-to-GNP thresholds for debt-intolerant countries depend on the country's default and inflation history and may be as low as 15 percent in some cases. Debt intolerance is linked to the phenomenon of serial default that has plagued many countries over the past two centuries. Understanding and measuring debt intolerance is fundamental to assessing the problems of debt sustainability, debt restructuring, capital market integration, and the scope for international lending to ameliorate crises. The paper makes a first pass at quantifying debt intolerance, including delineating debtors' "clubs" and regions of vulnerability, based on a history of credit events for a large number of countries going back to the 1820s.

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Publisher Info
Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 34 (2003)
Issue (Month): 2003-1 ()
Pages: 1-74
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Handle: RePEc:bin:bpeajo:v:34:y:2003:i:2003-1:p:1-74

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Related research
Keywords: macroeconomics; Debt Intolerance;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Reinhart, Carmen & Reinhart, Vincent, 2003. "Twin fallacies about exchange rate policy in emerging markets," MPRA Paper 13874, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Easterly, William R., 1989. "Fiscal adjustment and deficit financing during the debt crisis," Policy Research Working Paper Series 138, The World Bank. [Downloadable!]
  3. Bulow, Jeremy & Rogoff, Kenneth, 1989. "Sovereign Debt: Is to Forgive to Forget?," American Economic Review, American Economic Association, vol. 79(1), pages 43-50, March. [Downloadable!] (restricted)
    Other versions:
  4. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," NBER Working Papers 7265, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Addicted to Dollars," NBER Working Papers 10015, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Giovannini, Alberto & de Melo, Martha, 1993. "Government Revenue from Financial Repression," American Economic Review, American Economic Association, vol. 83(4), pages 953-63, September. [Downloadable!] (restricted)
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This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
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