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Growth and External Debt: A New Perspective on the African and Latin American Tragedies

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  • Cohen, Daniel

Abstract

This paper addresses two puzzles of the growth literature: the failure of standard growth equations to account for slow growth in Latin America and Africa; and the surprising failure of trade to explain growth when trade liberalization appears to play a significant role. The paper shows that: i) African growth is readily explained by macroeconomic mismanagement and low investment; ii) trade liberalization should be taken as a proxy for good ‘macroeconomic’ management rather than a genuine measure of the effect of trade upon growth; and iii) poor growth in Latin America (which does not seem to be explained by the preceding feature) is explained well by a variable (constructed in the text) representing the likelihood of debt crisis.

Suggested Citation

  • Cohen, Daniel, 1997. "Growth and External Debt: A New Perspective on the African and Latin American Tragedies," CEPR Discussion Papers 1753, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1753
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    References listed on IDEAS

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    1. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435, National Bureau of Economic Research, Inc.
    2. Cohen, Daniel, 1996. "Tests of the "Convergence Hypothesis": Some Further Results," Journal of Economic Growth, Springer, vol. 1(3), pages 351-361, September.
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    More about this item

    Keywords

    Economic Growth; External Debt; trade liberalisation;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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