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External Debt Sustainability and Domestic Debt in Heavily Indebted Poor Countries

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  • M. ARNONE
  • A. F. PRESBITERO

Abstract

In this paper we broaden the standard debt sustainability framework used in the IMF-WB Heavily Indebted Poor Countries (HIPC) Initiative to include the analysis of domestic public debt and other feedback effects into the usual debt sustainability analysis (DSA). The latter does not take into account the fully-fledged government budget constraint and the feedback effects of the fiscal and monetary adjustment required by multilateral programs. This work focuses on the evaluation of total public debt sustainability in a simple accounting framework that includes exchange rate effects. We use new data on domestic public debt and show how the switch from foreign to domestic borrowing, and rising domestic real interest rates are likely to undermine the overall sustainability and the success of debt relief programs.

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File URL: http://riss.vitaepensiero.it/scheda-articolo_digital/marco-arnone-andrea-f-presbitero/external-debt-sustainability-and-domestic-debt-in-heavily-indebted-poor-countries-000518_2007_0002_0029-150875.html
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Bibliographic Info

Article provided by Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore in its journal Rivista Internazionale di Scienze Sociali.

Volume (Year): 115 (2007)
Issue (Month): 2 ()
Pages: 187-213

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Handle: RePEc:vep:journl:y:2007:v:115:i:2:p:187-213

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Keywords: Debt Sustainability; Domestic Debt; HIPC;

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References

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  1. Jakob Christensen, 2004. "Domestic Debt Markets in Sub-Saharan Africa," IMF Working Papers 04/46, International Monetary Fund.
  2. John T. Cuddington, 1997. "Analysing the Sustainability of Fiscal Deficits in Developing Countries," International Finance 9706001, EconWPA.
  3. Craig Burrnside, 2005. "Fiscal Sustainability in Theory and Practice : A Handbook," World Bank Publications, The World Bank, number 7495, October.
  4. William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550423, December.
  5. George Iden & Marco Arnone, 2003. "Primary Dealers in Government Securities," IMF Working Papers 03/45, International Monetary Fund.
  6. World Bank & International Monetory Fund, 2001. "Developing Government Bond Markets : A Handbook," World Bank Publications, The World Bank, number 13865, October.
  7. Philippe Beaugrand & Montfort Mlachila & Boileau Loko, 2002. "The Choice Between External and Domestic Debt in Financing Budget Deficits," IMF Working Papers 02/79, International Monetary Fund.
  8. Aart Kraay & Vikram Nehru, 2006. "When Is External Debt Sustainable?," World Bank Economic Review, World Bank Group, vol. 20(3), pages 341-365.
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Cited by:
  1. Andrea Filippo Presbitero, 2009. "Debt Relief Effectiveness and Institution Building," Mo.Fi.R. Working Papers 15, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Andrea Filippo Presbitero, 2009. "The 2008-2009 Financial Crisis and the HIPCs: Another Debt Crisis?," Mo.Fi.R. Working Papers 29, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  3. Maria Cipollina, 2007. "The developing countries’ foreign debt in the last twenty years," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 3, July.
  4. Ahmad Danu Prasetyo & Naoyuki Yoshino, 2013. "Improving the Government Debt Market Quality by Determining the Optimal Structure of Government Debt Portfolio," Keio/Kyoto Joint Global COE Discussion Paper Series 2012-038, Keio/Kyoto Joint Global COE Program.

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