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Our LDC Debts

In: The United States in the World Economy

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  • Rudiger Dornbusch
  • Thomas S. Johnson
  • Anne O. Krueger

Abstract

The U.S. has significant interests involved in the world debt problem. It affects the profitability and even the stability of our banking system, but the debt problem also matters because debt service requires trade surpluses for debt- ors. Debtor countries have made their goods extra competitive, are selling in our market and are competing with our exports. The debt problem is therefore a part, though perhaps a small part, of the U.S. trade crisis. Finally we have a major foreign policy stake in the debt crisis in that debt collection brings about social and political instability. The paper sets out debt facts, followed with a brief look at the origins of the debt problem. The "transfer problem" is the general framework in which we discuss the problem of debt service for the debtor countries. We then discuss bank exposure and the quality of debts. The paper then addresses the trade implications of debt service and concludes with an overview of alternative proposals for solving the debt problem.

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This chapter was published in:

  • Martin Feldstein, 1988. "The United States in the World Economy," NBER Books, National Bureau of Economic Research, Inc, number feld88-1, July.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 6223.

    Handle: RePEc:nbr:nberch:6223

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    Cited by:
    1. Kenneth A. Froot, 1988. "Buybacks, Exit Bonds, and the Optimality of Debt and Liquidity Relief," NBER Working Papers 2675, National Bureau of Economic Research, Inc.
    2. Sebastian Edwards, 2000. "Capital Flows, Real Exchange Rates, and Capital Controls: Some Latin American Experiences," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 197-246 National Bureau of Economic Research, Inc.
    3. Cohen Daniel, 1988. "Is the discount on the secondary market a case for ldc debt relief ?," CEPREMAP Working Papers (Couverture Orange) 8823, CEPREMAP.
    4. Joseph Atta-Mensah, 2004. "Commodity-Linked Bonds: A Potential Means for Less-Developed Countries to Raise Foreign Capital," Working Papers 04-20, Bank of Canada.
    5. Sebastian Edwards, 1992. "Capital Flows, Foreign Direct Investment, and Debt-Equity Swaps in Developing Countries," NBER Working Papers 3497, National Bureau of Economic Research, Inc.
    6. Dylan McGee, Christopher, 2007. "Sovereign bond markets with political risk and moral hazard," International Review of Economics & Finance, Elsevier, vol. 16(2), pages 186-201.
    7. Sebastian Edwards, 1998. "Capital Inflows into Latin America: A Stop-Go Story?," NBER Working Papers 6441, National Bureau of Economic Research, Inc.
    8. Stephan Koren, 1992. "Debt relief for Eastern Europe — Its costs and the distribution of proceeds: Some preliminary results," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(4), pages 639-661, December.
    9. Paul R. Krugman, 1988. "Market-Based Debt-Reduction Schemes," NBER Working Papers 2587, National Bureau of Economic Research, Inc.

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