This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

External Debt and Political Instability

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Ozler, Sule
Tabellini, Guido

Additional information is available for the following registered author(s):

Abstract

This paper provides a theoretical and empirical analysis of the role played by domestic political incentives in the accumulation of large external debts by developing countries between 1972 and 1981. The theoretical model characterizes two equilibrium regimes. In one the borrower is on its demand curve and changes in the loan size desired by the borrower are accommodated by lenders. In the other regime the borrower is credit rationed, and the loan size is determined by the perceived country risk. Increased political instability increases the equilibrium loan size in the first regime and decreases it in the second. Using out-of-sample evidence, we identify the two regimes in the data. We then find that in the unconstrained regime political instability has a significant effect on the loan size, whereas it has no significant effect in the credit rationing regime. Hence the evidence indicates a positive effect of political instability on the demand for sovereign loans, as predicted by the theory.

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.

File URL: http://www.cepr.org/pubs/dps/DP582.asp
File Format: application/pdf
File Function:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 582.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Oct 1991
Date of revision:
Handle: RePEc:cpr:ceprdp:582

Contact details of provider:
Postal: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: Developing Countries; External Debt; Investment; Politics;

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Blackwell Publishing, vol. 48(2), pages 289-309, April. [Downloadable!] (restricted)
  2. Hajivassiliou, Vassilis A., 1987. "The external debt repayments problems of LDC's : An econometric model based on panel data," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 205-230. [Downloadable!] (restricted)
  3. Jeffrey Sachs & Daniel Cohen, 1982. "LDC Borrowing with Default Risk," NBER Working Papers 0925, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Diwan, Ishac & Verdier, Thierry, 1991. "Distributional aspects of debt adjustment," Policy Research Working Paper Series 657, The World Bank. [Downloadable!]
  5. Ozler, Sule, 1989. "On the Relation between Reschedulings and Bank Value," American Economic Review, American Economic Association, vol. 79(5), pages 1117-31, December. [Downloadable!] (restricted)
  6. Obstfeld, Maurice, 1986. "Capital mobility in the world economy: Theory and measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 24(1), pages 55-103, January. [Downloadable!] (restricted)
    Other versions:
  7. Alesina, Alberto & Tabellini, Guido, 1989. "External debt, capital flight and political risk," Journal of International Economics, Elsevier, vol. 27(3-4), pages 199-220, November. [Downloadable!] (restricted)
    Other versions:
  8. Bulow, Jeremy & Rogoff, Kenneth, 1989. "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 155-78, February. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alesina, Alberto, 1992. "Political models of macroeconomic policy and fiscal reform," Policy Research Working Paper Series 970, The World Bank. [Downloadable!]
  2. Andrew Williams & Abu Siddique, 2008. "The use (and abuse) of governance indicators in economics: a review," Economics of Governance, Springer, vol. 9(2), pages 131-175, May. [Downloadable!] (restricted)
  3. Robert Lavigne, 2006. "The Institutional and Political Determinants of Fiscal Adjustment," Working Papers 06-1, Bank of Canada. [Downloadable!]
  4. Massimo Morelli & Michele Tertilt, 2000. "Policy Stability under Different Electoral Systems," Working Papers 00-13, Ohio State University, Department of Economics. [Downloadable!]
  5. Johannes Fedderke, 2001. "Growth and institutions," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(6), pages 645-670. [Downloadable!]
  6. Tatiana Fic & Omar F. Saqib, 2006. "Political Instability and the August 1998 Ruble Crisis," Discussion Papers of DIW Berlin 626, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  7. Nauro F. Campos & Jeffrey B. Nugent, 2001. "Who Is Afraid Of Political Instability?," Development and Comp Systems 0012016, EconWPA. [Downloadable!]
    Other versions:
  8. James L. Butkiewicz & Halit Yanikkaya, 2005. "Time-Consistent Polities and Growth in Developing Countries: An Empirical Analysis," Working Papers 05-02, University of Delaware, Department of Economics. [Downloadable!]
    Other versions:
  9. Alberto Alesina & Sule Ozler & Nouriel Roubini & Phillip Swagel, 1992. "Political Instability and Economic Growth," NBER Working Papers 4173, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Shamit Chakravarti & Rina Bhattacharya & Benedict J. Clements & Sanjeev Gupta, 2002. "Fiscal Consequences of Armed Conflict and Terrorism in Low- and Middle-Income Countries," IMF Working Papers 02/142, International Monetary Fund. [Downloadable!]
Statistics
Access and download statistics

Did you know? A few items listed on IDEAS are over 2000 years old!

This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.