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Our LDC Debts

In: The United States in the World Economy

Author

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  • Rudiger Dornbusch
  • Thomas S. Johnson
  • Anne O. Krueger

Abstract

The U.S. has significant interests involved in the world debt problem. It affects the profitability and even the stability of our banking system, but the debt problem also matters because debt service requires trade surpluses for debt- ors. Debtor countries have made their goods extra competitive, are selling in our market and are competing with our exports. The debt problem is therefore a part, though perhaps a small part, of the U.S. trade crisis. Finally we have a major foreign policy stake in the debt crisis in that debt collection brings about social and political instability. The paper sets out debt facts, followed with a brief look at the origins of the debt problem. The "transfer problem" is the general framework in which we discuss the problem of debt service for the debtor countries. We then discuss bank exposure and the quality of debts. The paper then addresses the trade implications of debt service and concludes with an overview of alternative proposals for solving the debt problem.
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Suggested Citation

  • Rudiger Dornbusch & Thomas S. Johnson & Anne O. Krueger, 1988. "Our LDC Debts," NBER Chapters, in: The United States in the World Economy, pages 161-214, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:6223
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    Cited by:

    1. Dylan McGee, Christopher, 2007. "Sovereign bond markets with political risk and moral hazard," International Review of Economics & Finance, Elsevier, vol. 16(2), pages 186-201.
    2. José Wong, 2000. "Are changes in spreads of external-market debt also induced by contagion?," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 35(2), pages 72-80, March.
    3. Sebastian Edwards, 1989. "Structural Adjustment Policies in Highly Indebted Countries," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 1: The International Financial System, pages 159-208, National Bureau of Economic Research, Inc.
    4. Froot, Kenneth A, 1989. "Buybacks, Exit Bonds, and the Optimality of Debt and Liquidity Relief," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 49-70, February.
    5. Sebastian Edwards, 2000. "Capital Flows, Real Exchange Rates, and Capital Controls: Some Latin American Experiences," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 197-246, National Bureau of Economic Research, Inc.
    6. Sebastian Edwards, 1990. "Capital Flows, Foreign Direct Investment, and Debt-Equity Swaps in Developing Countries," NBER Working Papers 3497, National Bureau of Economic Research, Inc.
    7. Paul R. Krugman, 1989. "Private Capital Flows to Problem Debtors," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 1: The International Financial System, pages 299-330, National Bureau of Economic Research, Inc.
    8. Stephan Koren, 1992. "Debt relief for Eastern Europe — Its costs and the distribution of proceeds: Some preliminary results," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 128(4), pages 639-661, December.
    9. Cohen, Daniel, 1988. "Is the discount on the secondary market a case for LDC debt relief?," Policy Research Working Paper Series 132, The World Bank.
    10. Sebastian Edwards, 1998. "Capital Inflows into Latin America: A Stop-Go Story?," NBER Working Papers 6441, National Bureau of Economic Research, Inc.
    11. Paul R. Krugman, 1988. "Market-Based Debt-Reduction Schemes," NBER Working Papers 2587, National Bureau of Economic Research, Inc.
    12. Turvey, Calum G. & Chantarat, Sommarat, 2006. "Weather-Linked Bonds," 2006 Agricultural and Rural Finance Markets in Transition, October 2-3, 2006, Washington, DC 133091, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    13. Joseph Atta-Mensah, 2004. "Commodity-Linked Bonds: A Potential Means for Less-Developed Countries to Raise Foreign Capital," Staff Working Papers 04-20, Bank of Canada.

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