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Our LDC Debts

In: The United States in the World Economy

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

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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This chapter was published in:
  • Martin Feldstein, 1988. "The United States in the World Economy," NBER Books, National Bureau of Economic Research, Inc, number feld88-1.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 6223.
    Handle: RePEc:nbr:nberch:6223
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    National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

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    1. Sebastian Edwards, 1985. "The Pricing of Bonds and Bank Loans in International Markets: An Empirical Analysis of Developing Countries' Foreign Borrowing," NBER Working Papers 1689, National Bureau of Economic Research, Inc.
    2. Eichengreen, Barry & Portes, Richard, 1985. "Debt and Default in the 1930s: Causes and Consequences," CEPR Discussion Papers 75, C.E.P.R. Discussion Papers.
    3. N/A, 1985. "Asia," India Quarterly: A Journal of International Affairs, , vol. 41(1), pages 80-87.
    4. Fishlow, Albert, 1985. "Lessons from the past: capital markets during the 19th century and the interwar period," International Organization, Cambridge University Press, vol. 39(03), pages 383-439, June.
    5. Cohen, Daniel & Sachs, Jeffrey, 1986. "Growth and external debt under risk of debt repudiation," European Economic Review, Elsevier, vol. 30(3), pages 529-560, June.
    6. Martin Feldstein, 1986. "International Debt Service and Economic Growth: Some Simple Analytics," NBER Working Papers 2076, National Bureau of Economic Research, Inc.
    7. Paul De Grauwe & Michele Fratianni, 1984. "The Political Economy of International Lending," Cato Journal, Cato Journal, Cato Institute, vol. 4(1), pages 147-184, Spring/Su.
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