Analyses of the nature of debt relying on the theory of rational expectations conclude that the burden of public debt need not fall on future generations if the present generation anticipates the higher taxes needed in the future for debt servicing. However, there have been many instances where increases in budget deficits have been followed by a decrease in the savings propensity of the private sector. Foreign exchange earnings also have to be set aside. It appears that the main problem for countries in an early stage of economic development, is that often the borrowings have not been productively employed so that a national debt crises results. Foreign lenders become increasingly reluctant to lend further amounts to a country, which has been a net capital importer. This paper puts forward a methodology of testing a new theory of economic growth that emphasises key factors determining the success or failure of policies that change underlying economic structures, and hence would lead to an intrinsic monitoring of ?over-borrowing?.
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.
Publisher Info
Paper provided by School of Finance and Economics, University of Technology, Sydney in its series Working Paper Series with number
140.
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.: