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The Debt Crisis: Structural Explanations of Country Performance

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Author Info
Andrew Berg
Jeffrey Sachs

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Abstract

This paper develops a cross-country statistical model of debt rescheduling, and the secondary market valuation of LDC debt, which links these variables to key structural characteristics of developing countries, such as the trade regime, the degree of income inequality, and the share of agriculture in GNP Our most striking finding is that higher income inequality is a significant predictor of a-higher probability of debt rescheduling in a cross-section of middle-income countries. We attribute this correlation to various difficulties of political management in economies with extreme inequality. We also find that outward-orientation of the trade regime is a significant predictor of a reduced probability of debt rescheduling.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2607.

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Date of creation: Jun 1988
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Publication status: published as Journal of Development Economics 29 1988, 271-306translation in Trimestre Economica Vol. LVI, July 1989, Mexico
Handle: RePEc:nbr:nberwo:2607

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  1. 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)
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(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. Lynn Aylward & Rupert Thorne, 1998. "Countries' Repayment Performance Vis-á-Vis the IMF," IMF Staff Papers, Palgrave Macmillan Journals, vol. 45(4), pages 2. [Downloadable!] (restricted)
  2. Lestano & Jan Jacobs & Gerard H. Kuper, 2004. "Indicators of financial crises do work! An early-warning system for six Asian countries," International Finance 0409001, EconWPA. [Downloadable!]
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  3. Alberto Alesina & Dani Rodrik, 1991. "Distributive Politics and Economic Growth," NBER Working Papers 3668, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Josef Zweimueller, . "Inequality, Redistribution, and Economic Growth," IEW - Working Papers iewwp031, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  5. Knack, Stephen, 2000. "Social capital and the quality of Government : evidence from the U.S. States," Policy Research Working Paper Series 2504, The World Bank. [Downloadable!]
  6. Felipe Larraín & Rodrigo Vergara, 1992. "Distribución del Ingreso, Inversión y Crecimiento," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 29(87), pages 207-228. [Downloadable!]
  7. Shen, Ling, 2005. "Inequality and growth: A joint analysis of demand and supply," Proceedings of the German Development Economics Conference, Kiel 2005 30, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  8. Robert Lavigne, 2006. "The Institutional and Political Determinants of Fiscal Adjustment," Working Papers 06-1, Bank of Canada. [Downloadable!]
  9. Michael Bruno, 1993. "Inflation and Growth in an Integrated Approach," NBER Working Papers 4422, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Cumby, Robert & Pastine, Tuvana, 2001. "Emerging Market Debt: Measuring Credit Quality and Examining Relative Pricing," CEPR Discussion Papers 2866, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  11. Francis A. Longstaff & Jun Pan & Lasse H. Pedersen & Kenneth J. Singleton, 2007. "How Sovereign is Sovereign Credit Risk?," NBER Working Papers 13658, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Mohapatra, Sanket & De, Prabal & Ratha, Dilip, 2007. "Shadow sovereign ratings for unrated developing countries," Policy Research Working Paper Series 4269, The World Bank. [Downloadable!]
  14. Derek Hung Chiat Chen, 2003. "Intertemporal excess burden, bequest motives, and the budget deficit," Policy Research Working Paper Series 3086, The World Bank. [Downloadable!]
  15. Kraay, Aart & Nehru, Vikram, 2004. "When is external debt sustainable?," Policy Research Working Paper Series 3200, The World Bank. [Downloadable!]
    Other versions:
  16. Menbere Workie Tiruneh, 2005. "Why heavily indebted poor countries have failed to pay back their debt? An empirical investigation (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 55(3-4), pages 124-140, March. [Downloadable!]
  17. Diwan, Ishac & Verdier, Thierry, 1991. "Distributional aspects of debt adjustment," Policy Research Working Paper Series 657, The World Bank. [Downloadable!]
  18. Alberto Alesina & Guido Tabellini, 1988. "External Debt, Capital Flight and Political Risk," UCLA Economics Working Papers 538, UCLA Department of Economics. [Downloadable!]
    Other versions:
  19. Ling Shen, 2004. "Education, Income Distribution and Innovation," Bonn Econ Discussion Papers bgse11_2004, University of Bonn, Germany. [Downloadable!]
  20. Keefer, Philip & Knack, Stephen, 2000. "Polarization, politics, and property rights : links between inequality and growth," Policy Research Working Paper Series 2418, The World Bank. [Downloadable!]
    Other versions:
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