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External Debt Sustainability: Theory and Empirical Evidence

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  • Marco Arnone

    (Catholic University of Milan)

  • Luca Bandiera

    (World Bank)

  • Andrea Presbitero

    (Politechnic University of Marche Italy)

Abstract

This paper is a review of the different approaches on external debt sustainability. The Heavily Indebted Poor Country (HIPC) Initiative was launched to assure a permanent exit from debt dependence. However, the IMF-World Bank program is not without faults, in particular for what concerns debt sustainability analysis. The aim of this work is to present the IMF-World Bank approach to debt sustainability, together with the other approaches in the literature. We show that a new and broader framework is emerging to address the main shortcomings of the standard analysis, namely, the effects that large external debts and deficits have on growth and the macroeconomic environment.

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File URL: http://128.118.178.162/eps/if/papers/0512/0512007.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0512007.

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Length: 48 pages
Date of creation: 25 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpif:0512007

Note: Type of Document - pdf; pages: 48
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Web page: http://128.118.178.162

Related research

Keywords: HIPC Initiative; Debt Sustainability; Debt Relief; External Debt.;

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References

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  1. Eaton, Jonathan, 1993. "Sovereign Debt: A Primer," World Bank Economic Review, World Bank Group, vol. 7(2), pages 137-72, May.
  2. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," NBER Working Papers 9908, National Bureau of Economic Research, Inc.
    • Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
  3. repec:rus:hseeco:123922 is not listed on IDEAS
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  6. Asiedu, Elizabeth, 2003. "Debt relief and institutional reform: a focus on Heavily Indebted Poor Countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(4), pages 614-626.
  7. Morris Goldstein, 2003. "Debt Sustainability, Brazil, and the IMF," Working Paper Series WP03-1, Peterson Institute for International Economics.
  8. Carlos A. Rodríguez, 1990. "The External Effects of Public Sector Deficits," CEMA Working Papers: Serie Documentos de Trabajo. 70, Universidad del CEMA.
  9. Annalisa Fedelino & Alina Kudina, 2003. "Fiscal Sustainability in African HIPC Countries," IMF Working Papers 03/187, International Monetary Fund.
  10. Jean Imbs & Romain Rancière, 2005. "The overhang hangover," Economics Working Papers 878, Department of Economics and Business, Universitat Pompeu Fabra.
  11. Kraay, Aart & Nehru, Vikram, 2004. "When is external debt sustainable?," Policy Research Working Paper Series 3200, The World Bank.
  12. Cuddington, John T., 1997. "Analyzing the sustainability of fiscal deficitsin developing countries," Policy Research Working Paper Series 1784, The World Bank.
  13. Dooley, Michael P, 1989. "Debt Relief and Leveraged Buy-Outs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 71-75, February.
  14. Nicolas Depetris Chauvin & Aart Kraay, 2005. "What Has 100 Billion Dollars Worth of Debt Relief Done for Low- Income Countries?," International Finance 0510001, EconWPA.
  15. Hjertholm, Peter, 2001. "Debt Relief and the Rule of Thumb: Analytical History of HIPC Debt Sustainability Targets," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  16. Catherine Pattillo & Hélène Poirson & Luca Antonio Ricci, 2011. "External Debt and Growth," Review of Economics and Institutions, Università di Perugia, vol. 2(3).
  17. Claudio M. LOSER, 2004. "External Debt Sustainability: Guidelines For Low- And Middle-Income Countries," G-24 Discussion Papers 26, United Nations Conference on Trade and Development.
  18. Kamau Thugge & Anthony R. Boote, 1997. "Debt Relief for Low-Income Countries and the HIPC Initiative," IMF Working Papers 97/24, International Monetary Fund.
  19. William R. Cline, 1995. "International Debt Reexamined," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 46.
  20. Jakob Christensen, 2004. "Domestic Debt Markets in Sub-Saharan Africa," IMF Working Papers 04/46, International Monetary Fund.
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  22. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
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  25. Claessens, Stijn & Detragiache, Enrica & Kanbur, Ravi & Wickham, Peter, 1996. "Analytical aspects of the debt problems of heavily indebted poor countries," Policy Research Working Paper Series 1618, The World Bank.
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Citations

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Cited by:
  1. Dobdinga Fonchamnyo, 2009. "Debt Relief Incentives in Highly Indebted Poor Countries (HIPC): An Empirical Assessment," International Advances in Economic Research, Springer, vol. 15(3), pages 322-335, August.
  2. Zaman, Gheorghe & Georgescu, George, 2011. "Sovereign risk and debt sustainability: warning levels for Romania," MPRA Paper 32924, University Library of Munich, Germany.

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