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Reconsidering External Financing of Domestic Budget Deficits: Debunking Some Received Wisdom

Author

Listed:
  • Mr. David Woo
  • Mr. Simon T Gray

Abstract

The past decade has witnessed a steady increase in outstanding external sovereign debt issued by emerging market economies. This paper examines some of the “received wisdom” regarding the benefits of external financing of domestic budget deficits and argues that it is often predicated on a narrow set of assumptions and incomplete evaluation of the underlying costs. The paper also suggests alternative sources of financing that can help capture some of the benefits associated with foreign financing without all of its costs.

Suggested Citation

  • Mr. David Woo & Mr. Simon T Gray, 2000. "Reconsidering External Financing of Domestic Budget Deficits: Debunking Some Received Wisdom," IMF Policy Discussion Papers 2000/008, International Monetary Fund.
    • Handle: RePEc:imf:imfpdp:2000/008
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    Citations

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    Cited by:

    1. Garima Vasishtha, 2010. "Domestic versus External Borrowing and Fiscal Policy in Emerging Markets," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 1058-1074, November.
    2. Benjamin Ayodele Folorunso, 2013. "Relationship between Fiscal Deficit and Public Debt in Nigeria: an Error Correction Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 5(6), pages 346-355.
    3. Hanif, Muhammad N., 2002. "Public Debt Management," MPRA Paper 10212, University Library of Munich, Germany.
    4. Alicia García Herrero & Javier Santillán & Sonsoles Gallego & Lucía Cuadro & Carlos Egea, 2002. "Latin American Financial Development in Perspective," Working Papers 0216, Banco de España.
    5. Anis Chowdhury & Iman Sugema, 2005. "How Significant and Effective has Foreign Aid to Indonesia been?," Centre for International Economic Studies Working Papers 2005-05, University of Adelaide, Centre for International Economic Studies.
    6. Wolfgang Gerstenberger & Joachim Jungfer & Heinz Schmalholz, 2002. "Standortbedingungen in Polen, Tschechien und Ungarn und die Position Sachsens im Standortwettbewerb : Gutachten im Auftrag der Wirtschaftsförderung Sachsen GmbH," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 33.

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