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Debt and World Money

In: Economic Development and World Debt

Author

Listed:
  • Benjamin Hopenhayn
  • Marcelo Dinenzon

Abstract

The origins of the contemporary debt crisis are usually traced to the imprudence both of creditors and borrowers in the years of the petro-dollars recycling feast. The debt ‘bubble’ burst through an ‘external shock’: the 1979–80 shift in the monetary policy stance of the international monetary regime’s hegemonic power. As a result interest (floating) rates bearing on most of the stock of debt shot up; world output and trade declined sharply; prices of primary commodities which account for most of the exports of indebted developing countries suffered a steep and prolonged downfall. The bankers stopped lending — with a lag — and the debtors were forced to adjust severely through demand policies which sank their economies into deep recessions, great monetary, fiscal and price upheavals, and huge capital flights.

Suggested Citation

  • Benjamin Hopenhayn & Marcelo Dinenzon, 1989. "Debt and World Money," Palgrave Macmillan Books, in: H. W. Singer & Soumitra Sharma (ed.), Economic Development and World Debt, chapter 15, pages 181-198, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-20044-3_15
    DOI: 10.1007/978-1-349-20044-3_15
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