External Debt, Budget Deficits and Disequilibrium Exchange Rates
AbstractThe paper investigates the sources of debt and debt difficulties for a group of Latin American countries. It is argued that external shocks -- oil, interest rates, world recession and the fall in real commodity prices -- cannot account by themselves for the problems. Budget deficits that accommodate terms of trade deterioration and disequilibrium exchange rates are central to a complete explanation. The paper documents that in Chile an extreme currency overvaluation led to a massive shift into imported consumer durables while in Argentina overvaluation in conjunction with financial instability led to large-scale capital flight. In the case of Brazil the budget deficit is the explanation for the growth in external indebtedness.The difference in the experience of the three countries reflects the difference in their openness to the world economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1336.
Date of creation: Apr 1984
Date of revision:
Publication status: published as Dornbusch, Rudiger. "External Debt, Budget Deficits and Disequilibrium Exchange Rates." International Debt and the Developing Countries, edited by G . Smith and J. Cuddington. Washington D.C.: World Bank, (March 1985).
Note: ITI IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- R. Dornbusch, 1984. "External Debt, Budget Deficits and Disequilibrium Exchange Rates," Working papers 347, Massachusetts Institute of Technology (MIT), Department of Economics.
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.:
- Jeffrey Sachs, 1982. "LDC Debt in the 1980s: Risk and Reforms," NBER Working Papers 0861, National Bureau of Economic Research, Inc.
- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Maurice Obstfeld, 1983.
"Intertemporal Price Speculation and the Optimal Current-Account Deficit,"
NBER Working Papers
1100, National Bureau of Economic Research, Inc.
- Obstfeld, Maurice, 1983. "Intertemporal price speculation and the optimal current-account deficit," Journal of International Money and Finance, Elsevier, vol. 2(2), pages 135-145, August.
- Bruno, Michael, 1976. "The Two-Sector Open Economy and the Real Exchange Rate," American Economic Review, American Economic Association, vol. 66(4), pages 566-77, September.
- Dornbusch, Rudiger, 1983.
"Real Interest Rates, Home Goods, and Optimal External Borrowing,"
Journal of Political Economy,
University of Chicago Press, vol. 91(1), pages 141-53, February.
- Rudiger Dornbusch, 1981. "Real Interest Rates, Home Goods, and Optimal External Borrowing," NBER Working Papers 0779, National Bureau of Economic Research, Inc.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.