IDEAS home Printed from https://ideas.repec.org/a/oup/wbecrv/v1y1987i3p377-95.html
   My bibliography  Save this article

Public Debt Guarantees and Private Capital Flight

Author

Listed:
  • Eaton, Jonathan

Abstract

Significant amounts of private capital have flowed out of several of the more heavily indebted developing countries. This outflow, often called "capital flight ," largely escapes taxation by the borrowing-country government, and has generated concern about the prospects for future servicing of the debt. Imperfect contract enforcement may lead to implicit or explicit government guarantee of foreign debt. The model developed below demonstrates that a government policy of guaranteeing private debt can, in turn, generate more than one outcome. One such outcome replicates the allocation under perfect contract enforcement: national savings is invested domestically and foreign debt is repaid. The tax obligation implied by potential nationalization of private debt, however, can also lead to another outcome in which national capital flees and foreign debt may not be repaid.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Eaton, Jonathan, 1987. "Public Debt Guarantees and Private Capital Flight," World Bank Economic Review, World Bank Group, vol. 1(3), pages 377-395, May.
  • Handle: RePEc:oup:wbecrv:v:1:y:1987:i:3:p:377-95
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Leonce Ndikumana & Mare Sarr, 2016. "Capital Flight and Foreign Direct Investment in Africa: An Investigation of the Role of Natural Resource Endowment," SALDRU Working Papers 167, Southern Africa Labour and Development Research Unit, University of Cape Town.
    2. Bassetto, Marco, 2005. "Equilibrium and government commitment," Journal of Economic Theory, Elsevier, vol. 124(1), pages 79-105, September.
    3. Arellano, Cristina & Kocherlakota, Narayana, 2014. "Internal debt crises and sovereign defaults," Journal of Monetary Economics, Elsevier, vol. 68(S), pages 68-80.
    4. Diwan, Ishac & Verdier, Thierry, 1991. "Distributional aspects of debt adjustment," Policy Research Working Paper Series 657, The World Bank.
    5. Elhanan Helpman, 1989. "Voluntary Debt Reduction: Incentives and Welfare," IMF Staff Papers, Palgrave Macmillan, vol. 36(3), pages 580-611, September.
    6. 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.
    7. Anke Hoeffler & Catherine A Pattillo & Paul Collier, 1999. "Flight Capital as a Portfolio Choice," IMF Working Papers 99/171, International Monetary Fund.
    8. Cees G. H. Diks & Dennis P Botman, 2005. "The Role of Domestic and Foreign Investors in a Simple Model of Speculative Attacks," IMF Working Papers 05/205, International Monetary Fund.
    9. Eaton, Jonathan & Fernandez, Raquel, 1995. "Sovereign debt," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 3, pages 2031-2077 Elsevier.
    10. Letete Emmanuel & Sarr Mare, 2017. "Working Paper 275 - Illicit Financial Flows and Political Institutions in Kenya," Working Paper Series 2392, African Development Bank.
    11. Claessens, Stijn, 1993. "Alternative Forms of External Finance: A Survey," World Bank Research Observer, World Bank Group, vol. 8(1), pages 91-117, January.
    12. SWARAY, Raymond B., 2005. "Primary Commodity Dependence And Debt Problem In Less Developed Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(4).
    13. A. R. Kemal, 2001. "Debt Accumulation and Its Implications for Growth and Poverty," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 263-281.
    14. Cuddington, John T & Liang, Hong & Lu, Shihua, 1996. "Uncertainty, Trade, and Capital Flows in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 5(3), pages 192-224, October.
    15. Abdur R. Chowdhury, 2010. "External Debt and Growth in Developing Countries: A Sensitivity and Causal Analysis," Working Papers id:3151, eSocialSciences.
    16. Dennis P J Botman & Cees G H Diks, 2002. "Location of Investors and Capital Flight," Tinbergen Institute Discussion Papers 02-013/1, Tinbergen Institute.
    17. Josef Brada & Ali Kutan & Goran Vukšić, 2011. "The costs of moving money across borders and the volume of capital flight: the case of Russia and other CIS countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(4), pages 717-744, November.
    18. Michael P. Dooley & Kenneth M. Kletzer, 1994. "Capital flight, external debt, and domestic policies," Economic Review, Federal Reserve Bank of San Francisco, pages 29-37.
    19. Buiter, Willem H. & Sibert, Anne, 1999. "UDROP: A Small Contribution to the New International Financial Architecture," CEPR Discussion Papers 2138, C.E.P.R. Discussion Papers.
    20. Hermes, Niels & Lensink, Robert & Murinde, Victor, 2002. "Flight Capital and its Reversal for Development Financing," WIDER Working Paper Series 099, World Institute for Development Economic Research (UNU-WIDER).
    21. Franke, Günter & Benninga, Simon, 1989. ""Closet dollars" and taxes," Discussion Papers, Series II 77, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    22. Sweta Chaman Saxena & Meenakshi Rishi & Valerie Cerra, 2005. "Robbing the Riches; Capital Flight, Institutions, and Instability," IMF Working Papers 05/199, International Monetary Fund.
    23. Zafar Iqbal & Abdus Sattar, 2005. "The Contribution of Workers’Remittances to Economic Growth in Pakistan," PIDE-Working Papers 2005:187, Pakistan Institute of Development Economics.
    24. Brada, Josef C. & Kutan, Ali M. & Vukšić, Goran, 2013. "Capital Flight in the Presence of Domestic Borrowing: Evidence from Eastern European Economies," World Development, Elsevier, vol. 51(C), pages 32-46.
    25. Lensink, Robert & Hermes, Niels & Murinde, Victor, 1998. "The Effect of Financial Liberalization on Capital Flight in African Economies," World Development, Elsevier, vol. 26(7), pages 1349-1368, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:wbecrv:v:1:y:1987:i:3:p:377-95. See general 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: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/wrldbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.