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On the sustainability of external debt: is debt relief enough?

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  • Gianni Vaggi
  • Annalisa Prizzon

Abstract

Elaborating on Pasinetti (1998), the ‘geometry of debt sustainability’ (GDS) represents an analytical tool for the analysis of the long term sustainability of foreign debt. The paper focuses on debt sustainability in low-income countries, which face several major challenges simultaneously: achieving economic growth, consolidating human development goals and meeting regular debt service payments. The GDS reveals how the ‘structural’ aspect of debt sustainability—as indicated by trends in the non-interest current account—is closely interlinked with sustainability from a ‘financial’ point of view—as indicated by the relationship between the growth and the interest rate. The GDS shows why both debt cancellation and additional aid are necessary to give indebted low-income economies a chance to improve their long term economic viability.

Suggested Citation

  • Gianni Vaggi & Annalisa Prizzon, 2014. "On the sustainability of external debt: is debt relief enough?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(5), pages 1155-1169.
    • Handle: RePEc:oup:cambje:v:38:y:2014:i:5:p:1155-1169.
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    File URL: http://hdl.handle.net/10.1093/cje/bet039
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    Cited by:

    1. Gatien Bon & Gong Cheng, 2021. "Understanding China's role in recent debt relief operations: A case study analysis," International Economics, CEPII research center, issue 166, pages 23-41.
    2. Charles, Sebastien & Dallery, Thomas, 2013. "L’expiation par l’austérité ou la stratégie de l’échec : une interprétation post-keynésienne de la crise des pays périphériques en zone euro [Expiation through austerity or the strategy of failure:," MPRA Paper 65735, University Library of Munich, Germany.
    3. Botta, Alberto & Spinola, Danilo & Yajima, Giuliano & Porcile, Gabriel, 2023. "Pasinetti, Debt Sustainability and (Green) Structural Change at the Time of Global Finance: An Emerging and Developing Countries’ Perspective," CAFE Working Papers 25, Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.
    4. Yun Yang & Leyi Chen & Qingqing Huang, 2015. "The Measurement of the Utilisation Efficiency of External Debt Funds and Its Influencing Factors," Australian Economic Papers, Wiley Blackwell, vol. 54(3), pages 185-205, September.
    5. Clara Capelli & Gianni Vaggi, 2013. "A better indicator of standards of living: The Gross National Disposable Income," DEM Working Papers Series 062, University of Pavia, Department of Economics and Management.
    6. Clara Capelli & Gianni Vaggi, 2016. "Why Gross National Disposable Income Should Replace Gross National Income," Development and Change, International Institute of Social Studies, vol. 47(2), pages 223-239, March.
    7. Gatien Bon & Gong Cheng, 2020. "China’s overseas Sovereign debt relief actions: What insights do recent cases provide?," EconomiX Working Papers 2020-22, University of Paris Nanterre, EconomiX.
    8. Clara Capelli & Gianni Vaggi, 2014. "Why Gross National Disposable Income should substitute Gross National Income," DEM Working Papers Series 091, University of Pavia, Department of Economics and Management.
    9. Debapriya Bhattacharya & Zeeshan Ashraf, 2018. "Is Bangladesh Rolling towards Debt Stress? An Exploration of Debt Sustainability in the Context of Recent External Financial Flows," South Asian Journal of Macroeconomics and Public Finance, , vol. 7(2), pages 137-173, December.

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    More about this item

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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