Martin Paldam () (School of Economics and Management, University of Aarhus, Denmark)
Abstract
The paper uses the data from the incomplete debt cycle for the LDC world from 1970 onwards to tell the typical story of debt. Two debt stories are contrasted: A good debt story: Here countries borrow and invest wisely, so that they grow more. A bad debt story: Here countries borrow when they are in crisis, and the debt grows and generates low growth in the next couple of decades. The analysis concentrates on two relations: (R1) the relation between borrowing and growth, and (R2) the relation between initial debt and growth. Both relations are negative, so essentially the stylized story of debt is a story of bad debt. The paper looks in vain for non-linearities in the two relations, suggesting that the good debt story applies in some part of the range. The result thus confirms that international transfers to governments are an inefficient way to promote development.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number
2008-10.
Find related papers by JEL classification: F34 - International Economics - - International Finance - - - International Lending and Debt Problems H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment